Demographic Change and Income Inequality in Taiwan

In this study, we examine effects of demographic change on trends in income inequality in Taiwan. Using data pooled from the Surveys of Family Income and Expenditure, we document trends in family income from 1981 to 2000 and decompose effects of the age, education, and marital status of household head, and household size in a quantile-regression counterfactual framework. Results show that age of household head is the major demographic factors contributing to rising income inequality. The effects of these demographic factors mainly come from changes in population composition, rather than changes in the structural return to these factors. In contrast to prior studies focusing on the demand-side of labor-market effects, our study demonstrates the importance of supply-side population composition.