The Taiwan Success Story: Rapid Growith With Improved Distribution in the Republic of China, 1952-1979 by Shirley W Y Kuo & Gustav Ranis

Author:Shirley W Y Kuo & Gustav Ranis [Kuo, Shirley W Y & Ranis, Gustav]
Language: eng
Format: epub
Tags: Ethnic Studies, American, Asian American Studies, Social Science, Political Science, World, Asian, Regional Studies
ISBN: 9781000234336
Google: wGMPEAAAQBAJ
Goodreads: 51581678
Publisher: Routledge
Published: 2020-01-08T00:00:00+00:00

Labor Intensity

As will be more fully explained in Chapter 5, the pattern of industrial growth can affect the family distribution of income through changes in the functional distribution of income. For example, if the wage share goes up because of the adoption of a labor-intensive growth path, the distribution of income will improve, assuming that wage income is better distributed than property income, which it generally is. If the wage share declines because of technological changes that save labor and increase capital use, the distribution of family income will worsen. Between 1951 and 1954, the early period of import substitution, the share of wage income in total income sharply increased from 40.7 percent to 46.2 percent. In ensuing years that share was fairly stable, at least until the onset of export substitution policies again increased the wage share in the 1960s, especially after commercialization. Given the distortion of relative prices that usually accompanies import substitution, Taiwan's achievement of a stable wage share is significant. The chief reasons for this performance are that prices of factors of production, i.e., capital and labor, were more distorted before 1954 than subsequently and that import substitution policies were relatively mild.

If a stable or improving wage share is one precondition for the improved distribution of nonagricultural income, the adoption of a labor-intensive growth path is another. The data indicate that growth in Taiwan during the 1950s was not focused on highly capital-intensive industries, as is typical of many LDCs. In fact, the most labor-intensive branches of industry grew at rates well above the average. The share in total industrial value added of the seven most labor-intensive industries rose from 10.9 percent in 1954 to 17.6 percent in 1961. The large textile and apparel industry, which still was more labor-intensive than the average for all industry, grew at a slower rate; the tobacco industry, the least labor-intensive, became smaller. In addition, manufacturing in Taiwan was much more labor intensive than in the typical LDC, e.g., Pakistan.

The labor-intensive bias of manufacturing, the good distribution of industrial assets, the pattern of growth and spatial dispersion of the more labor-intensive industries, the relatively mild price distortions — all these factors served to improve the overall distribution of nonagricultural income or at least to prevent its worsening. This performance, together with the rapidly improving rural income distribution, paved the way for the substantial decline observed in overall income inequality during the 1950s. It is not possible to say more than this. The meager quantity and quality of data for the 1950s, especially for factor income, preclude formal decomposition analysis of the type undertaken in subsequent chapters. Instead, the estimates should be viewed as orders of magnitude that might explain the marked tendency for the value of the Gini coefficient to decline between 1953 and 1964. But even if there can be doubt about the size of income distribution levels and changes, there is strong evidence that a substantial improvement occurred during the 1950s. This improvement was the result of an

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