Fast development with a stable income distribution: Taiwan, 1979-94

This paper studies the mechanisms underlying the apparent stability of the income distribution in Taiwan. An original decomposition method based on mi cro-simulation techniques is proposed. Applied to the distribution of incom e in Taiwan since 1979, it permits isolating the respective impact of chang es in: (a) the earning structure; (b) labor-force participation behavior; a nd (c) the sociodemographic structure of the population. The stability of t he distribution in Taiwan appears as the result of various structural force s which happened to offset each other. The small drop observed in the inequ ality of individual earnings resulted from the combination of unequalizing changes in the wage structure and the effects of changes in female labor-fo rce participation as well as in the educational structure of the population . However, the same offsetting forces, together with changes in the composi tion of households, resulted in a small increase in the inequality of the d istribution of equivalized household income.