The Effects of Population Aging, the Ruling Political Party, and Local Governments on Welfare Spending in Taiwan: 1993-2007

Abstract

There are many studies that investigate, whether population aging leads to a larger welfare state. In a democratic country like Taiwan, we would expect public spending, especially on welfare items, to be influenced by changes demographic structure and political power: Taiwan is an aging society, and there has been a unique connection between welfare for the elderly and which political party is in power since 1993. We apply demographic variables and political factors the empirical models to explore their effects on the size of local government welfare spending. A panel data model for twenty-one counties and cities from 1993 to 2007 is used in our investigation. The results of this study show that the elderly are not the main determinant of the growth of welfare expenditures, nor do the political parties completely carry out their campaign promises to increase old age welfare after winning office. Instead, central government transfers are the main factor affecting the level of local government welfare spending. This also shows that decentralization is limited in Taiwan.