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Industrial policy, Structural Change, and Pattern of Industrial Productivity Growth in Taiwan
Tsu-tan Fu
Department of Economics & Center for Efficiency and Productivity Research, Soochow University
Hsing-chun Lin
Department of Applied Economics, National Chiayi University
Yih-ming Lin
Department of Applied Economics, National Chiayi University
Wei-sing Kong
Taiwan Research Institute
To be presented at the third World KLEMS Conference, Tokyo, Japan on May 19, 2014.
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1. Introduction
The purpose of this paper is to investigate the relationship among industrial policy, structural change and TFP growth pattern at industry level in 1981-2010.
We review the main Taiwan industrial development policy We construct the Taiwan KLEMS Database, in which the economy is divided into 31 industries based on the Asia KLEMS manual.
Investigate the structural change among industries.
We decompose the output growth into contributions of intermediate inputs as well as total factor productivity.
capital, labor and We further conduct cross-period and cross-industry comparisons on the structures of industry output growth and of the factor contribution in Taiwan.
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The Main Taiwan Industrial Development Strategies
Import Substition 1960's Light industry Average GDP Growth rate 10.2% 1970's Heavy and Chemical Industry Export Expansion 9.27% 1980-1990's High-Tech Industry ICT Rapid Growth 7.37% 2000's Knowledge-Intensive Manufacturing and Service Industry ICT Growth slow down 3.76% Figure 1: An overview of Taiwan’s Industrial Development 3
Challenges during 1981-2010
Oil crisis the appearance of a powerful opposition party the appreciation of the New Taiwan dollars (NT$) Labor and land cost increase inflation and asset bubbles (stock market and housing price)
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The Main Taiwan Industrial Development Strategies
Economic liberalization and Internationalization
ITRI and the technical support of the NSTP The Establishment of the HSIP
Tax incentives under the Statute of Upgrading Industries Promotion of the Semiconductor industry
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3.1 Growth Accounts
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3.1 Growth Accounts
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3.1 Growth Accounts
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3.1 Growth Accounts
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3.2 Taiwan KLEMS Database Outputs (GO, VA):
Based on DGBAS data Directorate General of Budget, Accounting and Statistics, Taiwan (DGBAS) http://www.dgbas.gov.tw
Time period: 1981-2010 93SNA (asset classification) 31 sectors ( the 32th sector, the “
EXTRA-TERRITORIAL ORGANIZATIONS AND BODIES
” in Asia KLEMS manual, is not available ) GO = II+ VA (Gross output = intermediate inputs + value added) Using National Income Survey data Convert 63 sectors into 31 sectors 10
3.2 Taiwan KLEMS Database Capital input (K):
Capital = real net capital stock (DGBAS) Capital stock- adopt the Benchmark extrapolation method Benchmark year: -those when each Industrial and Commercial Census took place and national wealth census (only once) Convert capital data from DGBAS (16 sectors available after 2001 and 11 sectors available before 2001) into the capital data in format of 31 sectors Base year: 2005 11
3.2 Taiwan KLEMS Database Labor input (L):
Man Hours: including man hours of employees, employers, own account workers, and unpaid family workers Data sources: 1.
Man hours - from Manpower survey 2.
Adjusted working hours– Employees’ Earnings Survey 3.
The source of average wages –The Manpower Utilization Survey 12
3.2 Taiwan KLEMS Database Labor input (L):
Total Labor compensation = Average Labor compensation (wage)* total equi-employed persons (Taiwan wage and productivity report) Total working hours 13
3.2 Taiwan KLEMS Database
Data from Intermediate Input of national income Divide all sectors into Materials(M), Services(S) three sectors, energy (E), Using Input-output table to get the inputs of E, M, S for each industry 14
3.2 Taiwan KLEMS Database K, L, E, M, S Shares:
K, L, E, M, S are known Nominal value shares for L, E, M, S, and K: 1.
SL = L/Gross output 2.
SE = E/Gross output 3.
SM = M/Gross output 4.
SS = S/Gross output 5.
Capital share SK= 1 – SL – SE – SM - SS 15
3.2 Taiwan KLEMS Database Total Factor Productivity (TFP):
TFP growth (dlnTFP) is defined as: ◦ (1) for Growth Output (GO) dlnTFP_GO = dln(GO) – SL*dlnL - SK*dlnK
SS*dlnS - SE* dlnE – SM*dlnM –
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Table1: The industry Value Added weights by sector
Sector Primary Secondary Manufacturing Tertiary 1981-1990 1991-2000 2001-2010 unit:% 1981-2010 6.13
3.10
1.73
3.66
44.75
35.55
49.11
34.70
27.03
62.19
30.99
26.29
67.27
36.82
29.62
59.53
Primary and Secondary sectors decreased over time. Tertiary sector increased up to 67%. Secondary to 31%.
Figure 1: Industrial structure of Taiwan: 1981-2010 1987 is the year of industrial structure turning in Taiwan.
Table 2-1: Industry Value Added Weights by selected year (Primary & Secondary)
unit:% Sector
Secondary
Industry number 1.Agriculture, hunting and forestry 2.Mining and quarrying 3.Food products, beverages and tobacco 4.Textiles, textile products, leather and footwear 5.Wood and products of wood and cork 6.Pulp, paper, paper products, printing and publishing 7.Coke, refined petroleum products and nuclear fuel 8.Chemicals and chemical products 9.Rubber and plastics products 10.Other non-metallic mineral products 11.Basic metals and fabricated metal products 12.Machinery, nec 13.Electrical and optical equipment 14.Transport equipment 15.Manufacturing nec; Recycling 16.Electricity, gas and water supply 17.Construction
1981
7.65
2.16 4.48
6.96
0.65 1.57 1.30 2.50 1.42 1.69 2.94 0.98 4.31
2.39 2.80 3.40
5.69
1990 4.24 0.68 3.33
4.47
0.41 1.29 1.14 2.82 2.10 1.43 3.99 1.28
5.46
2.42 2.01 2.81
4.61
2000 2.08 0.52 1.47 1.88 0.08 0.73 1.38 2.25 1.26 0.70
3.55
1.18
8.37
1.56 1.04 2.06
3.22
2010 1.69 0.48 1.24 0.82 0.07 0.63 1.09
3.23
0.70 0.47
3.30
1.27
12.08
1.26 0.65 1.35 2.90
Most manufacturing industries decreased over time. Industry #8, 11, 13, 17 remain important.
Table 2-2: Industry Value Added Weights by selected year (Tertiary)
Sector
Tertiary
Industry number 18.Sale, maintenance and repair of motor vehicles 19.Wholesale trade and commission trade 20.Retail trade, except of motor vehicles and motorcycles 21.Hotel and restaurants 22.Transport and storage 23.Post and telecommunications 24.Financial intermediation 25.Real estate activities 26.Renting of m&eq and other business activities 27.Public admin and defence; Compulsory social security 28.Education
29.Health and social work 30.Other community, social and personal services 31.Private households with employed persons 1981 1.16
6.17 5.78
0.90 4.27 1.62 4.22 5.09
1.70
9.01
2.74 0.75 3.22 0.47 1990 1.44 6.23 5.76 1.67 4.40 1.72
7.77
6.42
2.02
9.29
3.06 1.60 3.51 0.61 2000 1.33
9.41
6.97 2.09 3.93 2.50
8.58
8.88
3.39 8.16 4.22 2.63 3.87 0.71 unit:% 2010 1.23
10.94
6.67
2.05 3.02 1.95 6.51
8.86
4.88 7.48
4.74 3.09 4.55 0.80
Most service industries increased over time. Industry #19, 20, 24, 25, 27 are more important.
Figure 3a: Growth of Industry Output 1982-2010 Growth rate varies by industry; Most are positive. Only 3 industries among top 10 are Secondary industries. Other top 7 are Tertiary industries.
Inputs : 1982-2010
Capital, Labor, Intermediate Inputs (Energy, Materials, Services)
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Figure 3b: Growth of Industry hour) 1982-2010 Labor Input (HEMP, working There are about 10 industries among primary and secondary industries which labor input growth rate are negative or close to 0.
Figure 3c: Growth of Industry Capital Stock Input 1982-2010 The growth rate of Capital input is relative higher than labor input.
Figure 3d: Growth of Industry Energy Input 1982-2010
Figure 3d: Growth of Industry Material Input 1982-2010
Figure 3e: Growth of Industry Service Input 1982-2010
TFP at Industry Level
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Table 4a: Growth of TFP by Period (Primary & Secondary)
Industry number Primary Secondary 1.Agriculture, hunting and forestry 2.Mining and quarrying 3.Food products, beverages and tobacco 4.Textiles, textile products, leather and footwear 5.Wood and products of wood and cork 6.Pulp, paper, paper products, printing and publishing 7.Coke, refined petroleum products and nuclear fuel 8.Chemicals and chemical products 9.Rubber and plastics products 10.Other non-metallic mineral products 11.Basic metals and fabricated metal products 12.Machinery, nec 13.Electrical and optical equipment 14.Transport equipment 15.Manufacturing nec; Recycling 16.Electricity, gas and water supply 17.Construction
1982-2010 1982-1990 1991-2000 2001-2010 0.75
1.96
-0.91
-0.32
0.46
-0.04
0.75
0.56
0.66
0.60
0.74
0.73
1.39
0.04
0.09
1.25
0.06
1.13
1.77
-0.46
0.03
0.85
-0.97
0.72
0.76
2.00
1.10
1.05
0.97
0.60
0.22
-0.16
1.95
0.62
0.80
0.06
-0.76
-0.29
0.78
0.37
1.39
0.70
0.44
0.77
1.43
0.70
1.28
0.00
1.19
1.49
-0.22
4.03
-1.48
-0.66
-0.33
0.38
0.14
0.25
-0.32
-0.03
-0.22
0.55
2.20
-0.09
-0.78
0.39
-0.16
13.Electrical and optical equipment is the highest TFP growth rate among manufacturing
Table 4b: Growth of Industry TFP by Period (Tertiary)
unit:%
1982-2010 1982-1990 1991-2000 2001-2010
Industry number Tertiary 18.Sale, maintenance and repair of motor vehicles 19.Wholesale trade and commission trade 20.Retail trade, except of motor vehicles and motorcycles 21.Hotel and restaurants 22.Transport and storage 23.Post and telecommunications 24.Financial intermediation 25.Real estate activities 26.Renting of m&eq and other business activities 27.Public admin and defence; Compulsory social security 28.Education
29.Health and social work 30.Other community, social and personal services 31.Private households with employed persons 1.77
2.46
2.92
2.06
2.02
2.83
4.53
4.51
1.99
2.26
3.69
1.82
1.32
2.34
0.69
0.09
1.15
5.69
1.57
6.08
1.45
8.72
0.47
2.31
1.06
3.94
-0.35 -0.13
-7.64 -2.00 -18.81 -1.55
0.80
0.87
1.50
1.34
0.16
2.52
1.83
1.24
0.36
3.49
-1.56
8.51
0.26
1.71
2.13
1.34
0.18
-1.44
0.40
-0.31
1.42
-0.59
1.68
1.09
23.Post and telecommunications is the highest among tertiary industries.
Figure 5: Growth of Industry TFP 1982-2010
Sources of Output Growth at Industry Level
31 Industries 1982 – 2010
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Table 6a: Sources of Industry Output Growth (in growth rate): 1982-2010 ( Primary & Secondary )
Industry number Primary 1.Agriculture, hunting and forestry Secondary 2.Mining and quarrying 3.Food products, beverages and tobacco 4.Textiles, textile products, leather and footwear 5.Wood and products of wood and cork 6.Pulp, paper, paper products, printing and publishing 7.Coke, refined petroleum products and nuclear fuel 8.Chemicals and chemical products 9.Rubber and plastics products 10.Other non-metallic mineral products 11.Basic metals and fabricated metal products 12.Machinery, nec 13.Electrical and optical equipment 14.Transport equipment 15.Manufacturing nec; Recycling 16.Electricity, gas and water supply 17.Construction
GO
0.80
0.05
1.77
-0.62
-2.97
2.96
3.91
7.30
4.38
2.97
5.91
7.67
11.92
4.79
1.67
5.41
3.25
ConK ConL
ConE ConM ConS ConII
0.45
0.90
0.44
0.41
1.50
0.88
0.96
1.89
0.59
0.44
-0.95
-2.50 -0.63
1.38
0.35
0.01
0.07
0.21
0.87
-0.09
0.04
0.81
-0.72 -0.01 -0.12
0.04
0.69
0.85
1.13
-1.24 -0.16 -1.66 -0.57 -2.38
0.13
-0.01
0.05
0.13
1.07
0.28
1.13
0.69
4.39
0.33
0.28
0.55
0.20
0.92
0.56
0.88
0.55
1.22
1.39
0.07
2.18
2.32
5.55
-0.01
-0.27
0.28
0.38
0.33
0.04
-0.45
-0.02
0.06
0.11
0.01
0.12
0.07
0.22
0.05
0.00
1.06
0.00
2.44
1.02
3.38
4.28
5.83
2.77
0.53
0.72
1.79
0.71
0.72
0.94
1.77
2.64
1.01
0.54
0.51
0.75
3.27
1.75
4.44
6.12
8.70
3.83
1.08
2.28
2.54
TFP
0.75
1.96
-0.91
-0.32
0.46
-0.04
0.75
0.56
0.66
0.60
0.74
0.73
1.39
0.04
0.09
1.25
0.06
Table 6b: Sources of Industry Output Growth (in % share): 1982-2010 (Primary & Secondary)
Industry number Primary 1.Agriculture, hunting and forestry Secondary 2.Mining and quarrying GO
100 100 3.Food products, beverages and tobacco
4.Textiles, textile products, leather and footwear
5.Wood and products of wood and cork
6.Pulp, paper, paper products, printing and publishing 7.Coke, refined petroleum products and nuclear fuel 8.Chemicals and chemical products 9.Rubber and plastics products 10.Other non-metallic mineral products 11.Basic metals and fabricated metal products
12.Machinery, nec
13.Electrical and optical equipment
14.Transport equipment
15.Manufacturing nec; Recycling 16.Electricity, gas and water supply
17.Construction
100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
ConK ConL
ConE ConM ConS
ConII
unit:% TFP
55.57 -118.20 1.44
-4635.7
6 26.53
41.08
69.05
93.58
-1157.9 128.42 1612.2 522.44 2263.0 3630.6
77.92
-5.04
2.10
45.73
31.05
78.88 -51.76
-56.98 116.37
-1.38
41.86
23.45
21.76
4.42
-0.28
15.45
10.35
30.14
0.75
-0.23
-9.10
7.43
5.37
12.55
18.40
4.81
4.99
2.80
0.84
57.23 -26.90
34.90
-0.30
18.09
1.78
1.57
5.34
4.39
27.33
3.87
2.54
0.27
2.04
0.96
1.86
1.08
0.08
19.59
0.12
19.03 -31.88 -11.28 51.89
55.74
19.02
80.11 -15.63
38.18
17.65
31.08
14.34
73.64
59.31
-1.50
19.21
60.20
55.85
34.27
12.05
16.33
24.23
76.12
74.72
58.77
7.67
15.16
20.19
57.28
55.85
48.94
57.86
31.91
13.27
55.05
15.91
23.08
22.18
21.06
32.31
9.36
23.08
75.23
79.89
72.98
80.00
64.30
42.23
78.25
12.54
9.56
11.66
0.76
5.37
23.17
1.88
Table 6c: Sources of Industry Output Growth (in growth rate): 1982-2010 (Tertiary)
Tertiary Industry number 18.Sale, maintenance and repair of motor vehicles 19.Wholesale trade and commission trade 20.Retail trade, except of motor vehicles and motorcycles 21.Hotel and restaurants 22.Transport and storage
23.Post and telecommunications
24.Financial intermediation 25.Real estate activities 26.Renting of m&eq and other business activities
27.Public admin and defence; Compulsory social security 28.Education
29.Health and social work 30.Other community, social and personal services 31.Private households with employed persons GO ConK ConL
5.78
7.00
5.63
0.77
1.14
0.70
7.92
5.32
1.22
1.29
10.47 1.87
7.87
3.65
6.29 12.37 0.19
8.38
1.85
1.98
3.31
6.44
0.65
0.46
0.72
2.39
8.65
6.56
6.16
1.79
3.13
3.22
1.87
0.22
0.42
0.75
1.18
0.10
0.75
0.03
0.36
1.09
ConE
0.10
0.06
0.15
0.56
0.03
0.13
0.02
0.01
0.07
0.01
0.16
0.21
0.14
0.00
ConM
1.15
0.30
0.31
1.58
1.15
0.69
0.18
0.60
1.33
0.25
0.54
1.79
0.85
0.00
ConS
1.24
1.85
1.46
1.76
1.67
1.73
1.88
0.76
2.35
0.81
0.60
1.65
2.05
0.00
ConII
2.48
2.21
1.92
3.90
2.85
2.55
2.08
1.37
3.75
1.07
1.29
3.64
3.05
0.00
TFP
1.77
2.46
2.92
2.06
1.15
5.69
1.06
-7.64
0.80
0.87
1.50
1.34
0.16
2.52
Table 6d: Sources of Industry Output Growth (in % share): 1982-2010 (Tertiary)
Tertiary Industry number 18.Sale, maintenance and repair of motor vehicles 19.Wholesale trade and commission trade 20.Retail trade, except of motor vehicles and motorcycles 21.Hotel and restaurants 22.Transport and storage 23.Post and telecommunications 24.Financial intermediation 25.Real estate activities 26.Renting of m&eq and other business activities 27.Public admin and defence; Compulsory social security 28.Education
29.Health and social work 30.Other community, social and personal services 31.Private households with employed persons GO ConK ConL 100.00 13.39 13.03
100.00 16.33 16.81
100.00 12.46
1.75
100.00 15.34
100.00 24.24
9.51
0.55
100.00 17.89
3.46
100.00 46.33 13.84
100.00 196.66 3.02
100.00 22.08 23.66
100.00 19.66 21.75
100.00 7.10
37.09
100.00 20.73 21.64
100.00 47.79
3.35
100.00 52.23
6.86
ConE
1.73
0.85
2.67
7.01
0.50
1.24
0.20
0.18
0.80
0.42
2.46
2.43
2.20
0.00
unit:%
ConM ConS
ConII
TFP 19.83 21.41 42.98 30.60
4.35
26.45 31.64 35.22
5.45
25.90 34.02 51.77
19.91 22.27 49.19 25.96
21.63 31.46 53.58 21.63
6.60
2.25
16.51 24.34 54.31
23.94 26.39 13.44
9.55
15.87 28.08 44.75
7.54
9.50
24.41 32.37 26.22
8.32
9.26
20.04 23.21
20.66 19.04 42.13 15.50
12.93 31.32 46.45
2.41
0.00
0.00
0.00
40.92
Figure 6: Sources of Industry Output Growth (in growth rate) 1982-2010
Sources of Growth for 3 selected Industries
Table 7a: Source of GO growth for “13.Electrical and Optical Equipment ” industry (with the highest VA weight in the Secondary sector)
Period 1982-2010 1982-1990 1991-2000 2001-2010
Con K
Con L Con E Con M Con S ConⅡ unit:% TFP 12.55
2.80
11.77 3.46 12.00
14.41
2.82
1.92
1.86
48.94 22.18 72.98 11.66
1.56 63.23 15.31 80.10 4.66 1.64
2.59
43.33 31.00 75.97
9.20
39.07 17.45 59.11 24.56
Table 7b: Source of Go growth for “19.Wholesale trade and commission trade” industry ( with high % share on II & S )
Period 1982-2010 1982-1990 1991-2000 2001-2010 Con K 16.33
18.18
Con L
16.81
16.34 Con E 0.85
0.39 Con M 4.35
6.79 Con S 26.45
26.89 ConⅡ 31.64
34.07 11.75
21.36
26.94
-1.25
0.57
2.26
-0.32
8.43
32.57
14.13
32.81
24.82
unit:%
TFP
35.22
31.42 28.50
55.06
Table 7c: Source of Go growth in “23.Post and telecommunications” industry
Period 1982-2010 1982-1990 1991-2000 2001-2010
Con K
17.89
23.48 Con L 3.46
3.17 Con E 1.24
0.07 Con M 6.60
19.26 Con S 16.51
32.89 ConⅡ 24.34
52.22 18.08
21.98
2.18
-5.12
1.75
-0.90
7.21
-5.88
16.62
34.30
25.58
27.53
unit:% TFP 54.31
21.12 54.16
55.61
Conclusion Remarks
Taiwan’s industrial policy focused on to support the socalled “hi-tech” industries, such as ICT industry (13 Electrical and Optical Equipment, Post and communications). The strategies include establishment of science based industrial parks, technological support from national research institute and national plan, providing tax incentives and special support for developing semiconductor industry.
Concluding Remarks
Significant structural changes happened in past decades.
Weights for primary and secondary decrease over time, except for “Electrical and optical equipment” and “Basic and fabricated metal”. Tertiary industry weight increases .
Several industrial, such as food products and textile, rubber and plastics, the growth rates of labor input (measured by total working hour, HEMP) are negative.
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TFP growth rate of “Electrical and Optical Equipment” industry is the highest in manufacturing industries.
TFP growth rate of “Post and communications” is the largest among the tertiary sector.
The impact of the industrial policy does not have impact on structural change, but also influences the TFP growth rate.
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Thank you for your attention!
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