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Evaluating The Relative Impact Of Fiscal Incentives And Trade Policies On The Returns To Manufacturing In Taiwan 1955-1995

Author

Listed:
  • Chun-Yan Kuo

    (Queen's University, Canada)

  • Glenn Jenkins

Abstract

In this 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 various variables to interact with each other. An application of the model is carried out for Taiwan, which implemented a variety of fiscal incentives over the past forty 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 industrialization process. The effects of any of the fiscal incentives are found generally 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

  • Chun-Yan Kuo & Glenn Jenkins, 2006. "Evaluating The Relative Impact Of Fiscal Incentives And Trade Policies On The Returns To Manufacturing In Taiwan 1955-1995," Working Paper 1060, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1060
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    References listed on IDEAS

    as
    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. 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.
    3. Gary Anderson, 2001. "Practical," Computing in Economics and Finance 2001 138, Society for Computational Economics.
    4. Ito, Takatoshi & Krueger, Anne O. (ed.), 1993. "Trade and Protectionism," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226386683, August.
    5. Takatoshi Ito & Anne O. Krueger, 1993. "Trade and Protectionism," NBER Books, National Bureau of Economic Research, Inc, number ito_93-2.
    6. 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.
    7. 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

    Keywords

    tax incentives; export promotion; industrialization; real exchange rate; trade policy; Taiwan;
    All these keywords.

    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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