Income redistribution and its effect on factor and import demand in Taiwan : a simulation approach

THE PURPOSE OF THE PAPER IS TO (1) EXAMINE THE EMPIRICAL CONTENT OF THE FACTOR-DIFFERENTIALS BY POTHESIS, AND (2) EVALUATE THE IMPACT OF INCOME REDISTRIBUTION ON FACTOR DEMAND AND ON IMPORTS. THE ANALYSIS OF CONSUMPTION PATTERNS OF DIFFERENT INCOME GROUPS IS BASED ON DATA DRAWN FROM THE REPORT ON THE SURVEY OF FAMILY INCOME AND EXPENDITURE IN TAIWAN: 1966. ONE MAJOR FINDING WAS THAT THE CAPITAL CONTENT OF THE CONSUMPTION MIX BY HOUSEHLDS IN THE LOWER HALF OF THE INCOME SCALE IS HIGHER THAN THAT BY HOUSEHOLDS IN THE UPPER HALF. THE PATTERN OF THE CONSUMPTION MIX IN TERMS OF CAPITAL/LABOR RATIO IS REVERSED IF MAJOR SERVICE ITEMS AND OTHER MISCELLANEOUS ITEMS ARE EXCLUDED. ANOTHER MAJOR FINDING WAS THAT GROWTH IN EMPLOYMENT AND AN EQUITABLE DISTRIBUTION OF INCOME ARE CONSISTENT GOALS. THUS THE FINDINGS DO NOT SUPPORT THE HYPOTHESIS THAT THE CONSUMPTION PATTERN OF THE RICH HAS A HIGHER CAPITAL CONTENT THAN THAT OF THE POOR. THE SIMULATION RESULTS INDICATE THE FEASIBILITY OF INTEGRATING THE REDISTRIBUTION ELEMENT INTO THE OVERALL DEVELOPMENT PLANNING BY EMPHASIZING THE GROWTH OF LABOR-INTENSIVE INDUSTRIES, THE SMALL-SCALE SECTOR, AND OTHER SIMILAR PROGRAMS TO BENEFIT THE POOR. GROWTH AND EQUITY ARE NOT ONLY CONSISTENT BUT ALSO ATTAINABLE WITHOUT RESORTING TO POLITICALLY UNPOPULAR AND UNFEASIBLE MEANS