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Evaluating the Relative Impact of Fiscal Incentives and Trade Policies on the Returns to Manufacturing in Taiwan, 1955–1995

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  • Glenn P. Jenkins
  • Chun‐Yan Kuo

Abstract

In the present paper, an integrated cash flow model is developed to examine the relative impact of tax incentives, financial subsidies, and macroeconomic variables on the profitability of industrial investments. It allows for the variables in the model to interact with each other. An application of the model is carried out for Taiwan, which has implemented a variety of fiscal incentives over the past 40 years. The principal policy conclusion is that trade and macroeconomic policies are much more important than income tax incentives or subsidized finance policies in determining the success of Taiwan's industrialization process. The effects of all of the fiscal incentives are found to be much smaller than those of the trade policies or the fundamental trends in macroeconomic variables such as the movement of the real exchange rate and the real wage rate.

Suggested Citation

  • Glenn P. Jenkins & Chun‐Yan Kuo, 2007. "Evaluating the Relative Impact of Fiscal Incentives and Trade Policies on the Returns to Manufacturing in Taiwan, 1955–1995," Asian Economic Journal, East Asian Economic Association, vol. 21(1), pages 75-100, March.
    • Handle: RePEc:bla:asiaec:v:21:y:2007:i:1:p:75-100
    DOI: 10.1111/j.1467-8381.2007.00247.x
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1989. "Applications Of Real Exchange Rate Analysis," Contemporary Economic Policy, Western Economic Association International, vol. 7(2), pages 1-26, April.
    2. Glenn Jenkins & Chun-Yan Kuo, 2000. "Promoting Export–Oriented Foreign Direct Investment in Developing Countries: Tax and Customs Issues," Development Discussion Papers 2000-03, JDI Executive Programs.
    3. Ya-Hwei Yang, 1993. "Government Policy and Strategic Industries: The Case of Taiwan," NBER Chapters, in: Trade and Protectionism, pages 387-411, National Bureau of Economic Research, Inc.
    4. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
    5. Gary Anderson, 2001. "Practical," Computing in Economics and Finance 2001 138, Society for Computational Economics.
    6. Ito, Takatoshi & Krueger, Anne O. (ed.), 1993. "Trade and Protectionism," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226386683, September.
    7. Takatoshi Ito & Anne O. Krueger, 1993. "Trade and Protectionism," NBER Books, National Bureau of Economic Research, Inc, number ito_93-2.
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    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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