Economic Growth and Income Inequality: the modern Taiwan experience

Abstract

This paper investigates the dispersion of household income in the course of economic development in Taiwan. Statistics show that inequality of income has increased since the early 1980s as the rate of economic growth has declined from 11.6% in 1986 to 4.1% in 2005. The empirical result on the relationship between economic growth and income distribution also fails to support the conventional inverted-U Kuznets curve. Factors leading to change in income disparity may be attributed to variations in family formation, economic structures, and the recent change in political leadership and institutional policy. Among them, increased single-parent families deteriorate overall income share, although growth in the service sector helps to alleviate inequity. The new political governance and policy reform since 2000 are detected to aggravate income inequality.