Revisiting the Lewisian turning point in Taiwan

Abstract

The Lewisian concept of dualism was empirically relevant to Taiwan given its heavy population pressure on scarce land. Most of the literature, albeit based on little solid evidence, concluded that Taiwan reached the Lewisian turning point around the end of the 1960s. Others argued that the LTP was after 1979. This paper first follows three criteria proposed by Minami (1973). We observe the active reallocation of employment after the mid-1960s and the dramatic increases in real wages of the agricultural and unskilled workers at the end of the 1960s. Furthermore, we introduce a new empirical methodology on the agricultural production function by adding a year dummy variable to identify a potential LTP, which leads to the agricultural marginal product of labor being zero before the LTP and becoming positive thereafter. Our findings support the notion that the LTP in Taiwan occurred around the period 1969–1973, rather than after 1979.