Taiwan Economy

The Japanese Empire took interest in the island and it was ceded over after the Qing Dynasty’s defeat in the First Sino-Japanese War. Japanese Colonial rule was instrumental in the industrialization of Taiwan, extending the railroads and other transportation networks, building an extensive sanitation system, and establishing a formal education system. During this time, the production of cash crops such as rice and sugar increased and by 1939, Taiwan was the seventh largest sugar producer in the world.

After WW2, the Japanese Empire surrendered Taiwan to the Republic of China, and it is during this period when the country plunged into a Civil War between the Chinese Nationalists (Kuomintang) and the Communist Party of China. After the loss

This rapid economic growth, also known as the Taiwan Miracle, resulted from a fiscal regime independent of mainland China and backed up by the support of the United States, among others. Taiwan was economically the second fastest growing state in Asia after Japan, and along with Hong Kong, South Korea and Singapore, became known as the Four Asian Tigers.

is essential in expanding the Taiwanese economy’s production possibilities. Examples of this is when the ruling party is occupied with productive economic strategizing instead of civil wars and the political climate is conducive for foreign direct investments

Following the Chinese Civil War, the Kuomintang returned to Taiwan free to implement land reforms1. The program that reduced farm rents to 37.5% of the harvest and increased crop yields encouraged farmers to invest in technologies that led to a 46% rise in rice production within 4 years2, a remarkable increase in productivity that allowed them to be exporters of rice, so much so that they were accused of dumping. Capital acquired from land reform financed a shift in economic dependency away from the primary sector due to consequential income increases that increased aggregate demands, thus expanding Taiwan’s productivity frontier in light

The Taiwanese ‘economic miracle’ is embraced by politicians and scholars alike and Taiwan often viewed as a development model due to its rapid and sustained economic growth after the 1960s. Taiwan has seen many transitions in its economy, from being a processing-orientated economy during the 1970s to the development of their semiconductor and high precision machinery industries existing today.

The Taiwanese government and various institutions have played a substantial role in this rapid and sustained economic growth over the past few decades. The factors for their growth and expansion of their production possibilities can be categorized into the following.

1. Investment in Technology and Capital

2. Property rights

3. Functioning legal framework

4. Stable political environment

How the Investment in Technology Leads to the increase in the Production Possibility Frontier

An economy often experiences technological progress with increase in investment in new technology and R&D. Technological progress would mean that society is able to produce more output from the same amount of productive resources. Technological progress aids in increasing quantity and quality of all factors of production. As a result, the production of the good in question, will