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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. Copyright 2007 The Authors Journal compilation 2007 East Asian Economic Association and Blackwell Publishing Ltd .

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
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    References listed on IDEAS

    as
    1. Ya-Hwei Yang, 1993. "Government Policy and Strategic Industries: The Case of Taiwan," NBER Chapters,in: Trade and Protectionism, NBER-EASE Volume 2, pages 387-411 National Bureau of Economic Research, Inc.
    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. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
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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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