Author(s)

Myoung Sub Choi & Hwan Yong Park

Abstract

This study aimed to evaluate the effects of relative efficiency and industrial diversity of old industry complex on production. Cobb–Douglas production function was estimated with consideration of relative efficiency and inverse of Herfindahl–Hirschman Index for the 94 old industrial complexes during 2014–2017. The effects on production which would be varied by industrial complex types and location types were also considered in the production model. As a result, statistically significant positive effects on productivity in old industrial complex have been estimated regardless of not only types of industrial complex (national and general industrial complex) but also location type (capital and non-capital area). In contrast, diversity estimated has a negative impact on productivity, but it does not show statistical significance. Therefore, to activate old industrial complex, plans for increases of relative efficiency by operation cost reductions of businesses in industrial complex will be needed. And to diversify the industrial types in old industrial complex, plans should consider the types of industrial complex and location type. Industrial linkages among companies in old industrial complex should also be considered in the process of selecting business.

Keywords

relative efficiency, industry diversity, Herfindahl–Hirschman index, Cop–Douglass production function, deteriorated industrial complex