Empirical evidence based on public expenditure patterns over a 24-year period
casts doubt on the existence of Wagner's Law, the displacement effect, and
budgetary recentralization in Taiwan, while supporting the Beck hypothesis of
declining real public sector size, the concentration effect, and decentralized
centralization. As is true of existing studies on other developing countries,
higher profit rates were found in joint public/private enterprises than in wholly
owned public firms. However, public enterprises in Taiwan, unlike those in
most developing countries, consistently contributed to rather than drained
from public revenue. As a result of this and of their relatively large contribution
to capital formation, public enterprises played an important role in Taiwan's
impressive economic growth record.
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