Productivity growth, scale economies, ship size economies and technical progress for the container shipping industry in Taiwan

• A theoretical model is developed to measure TFP growth rate of a shipping line.
• A theoretical model is developed to clarify the source of the TFP growth rate.
• A case study related to the container shipping industries in Taiwan is performed.
• The results show that scale and size economies are the main sources of TFP growth.

Rather than adding up all cost items of ship operation in the traditional vessel-based approach, this paper develops a theoretical model to evaluate and decompose the total factor productivity (TFP) growth of the container shipping industry in Taiwan. The results show that scale economies and ship size economies play the dominant roles in improving TFP growth. Since 2006, the dominance of TFP growth has gradually shifted from scale economies to ship size economies. This finding reconfirms the cost advantage of large vessels. In addition, it indicates that the deployment of large vessels has led to a problem of serious over-capacity.