Openness, Growth and Poverty: The Case of Taiwan

SummaryUsing time series data for Taiwan during 1964–2003, this paper examines how economic growth, openness, and the role of government contribute to poverty alleviation. Sustained economic growth is found to be the major driving force for poverty reduction in Taiwan, and openness to foreign trade helps the poor through a direct distribution effect as well as indirect growth effect, in both the long term and short term. While inward FDI has no significant impact on the mean income of the poor, outward FDI from Taiwan in the past two decades seems to have had an adverse effect on the poorest 20% of the population.