| This study examines the effect of the welfare state on income distribution in Taiwan based upon five theories on welfare states. Both taxation policy and social welfare policy are analyzed, the data sources of this study including micro data from income surveys and macro data from government documents. The before-after comparison method and time-series regression analysis are used to examine the two research questions: (1) What are the effects of taxation policy and social welfare policy on income distribution in Taiwan? (2) What are the other factors affecting income distribution? Results indicate that (1) Economic development is the major factor affecting income distribution in Taiwan. The influence of economic development on income distribution differs depending on quintile income shares and the stage of economic development. (2) Total social welfare expenditures are limited and go more frequently to military servicemen, government employees and educators, which do not help equalize income distribution. Social insurance programs are low-contribution, low-benefit as well as earnings-related, and low-income groups often do not participate in these programs. Hence, these programs also do not help equalize income distribution. Expenditures on social assistance are limited, which does not affect the income share of the bottom quintile. (3) Direct taxes, designed to promote savings and investment, do not help reduce income inequality. Indirect taxes generate more tax revenues than direct taxes, and the progressivity of indirect taxes helps reduced income inequality. In sum, the Taiwan's experience shows that the influence of economic development, the political nature of the welfare state, the policy design of the social welfare system and tax system need to be taken into account for understanding the relationship between income distribution and the welfare state. |
