ECONOMIC GROWTH CENTER

                       YALE UNIVERSITY

                       P.O. Box 208269
                     27 Hillhouse Avenue
                   New Haven, CT 06520-8269


               CENTER DISCUSSION PAPER NO.  778



           INCOME INEQUALITY IN TAIWAN 1976-1995:
             CHANGING FAMILY COMPOSITION, AGING,
             AND FEMALE LABOR FORCE PARTICIPATION



                       T.  Paul Schultz
                       Yale University





                        November 1997




Note:  Center Discussion Papers are preliminary materials circulated to
       stimulate discussions and critical comments.  This paper was
       prepared for presentation at the conference in memory of John Fei,
       August 1-2, 1997, Taipei.  This is a revised version of the paper
       paper originally written in March 1997.

       Financial support was provided by The Rockefeller Foundation through
       their grant for the study of the Economics of the Family in Low
       Income Countries.

       I appreciate having received access to the Personal Income Surveys
       collected by the Directorate-General of Budget, Accounting and
       Statistics, Executive Yuan.  I have benefited in revising the paper
       from the comments of Y.-P.  Chu, P.  Warr, and A. Levenson.  The
       programming assistance of Paul McGuire is greatly appreciated, as
       is the sharing of data and comments by Dr. H.Y. Wu of
       the Academica Sinica.

                           Abstract

      Change in income inequality in Taiwan from 1964 to 1995 is sensitive
  to how household incomes are adjusted for household composition.  The
  reasonable practice of dividing household income by persons (or adults) in
  the household eliminates the widely noted increase in income inequality
  from 1980 to 1995, and calls into question whether income inequality
  decreased substantially from 1964 to 1975.  The increasing share of
  the population over age 30 that is associated with the demographic transition
  has contributed only slightly to increasing income inequality across all
  ages.  The entry of women into the labor force is concentrated among
  higher wage groups, and thus when one attributes a shadow wage to the time
  of all persons, regardless of how much they work in the labor force,
  this broader measure of "full income" inequality is more equal
  than market income inequality, and it has decreased over time.


  JEL Classification:   O15, J12
  Keywords:             Income Inequality, Taiwan, Full Income, Family Composition