Inclusive Origins of Rapid Industrialization: the Persistent Effects of the Colonial Bank Networks on Taiwan’s Economic Miracle

57 Pages Posted: 7 Feb 2022

See all articles by Ching-I Huang

Ching-I Huang

National Taiwan University, Department of Economics

Shao-Yu Jheng

National Taiwan University - Department of Economics

Date Written: December 10, 2021

Abstract

Mainstream explanations for the East Asian miracle often neglect the role of inclusive economic institutions. This study examines how an inclusive banking institution established in Taiwan under Japanese colonial rule (1895-1945) boosted the Chinese Nationalist government’s capacity to promote postwar rapid industrialization. The decentralized, bottom-up banking system in colonial Taiwan allowed local elites to establish commercial banks to service farmers and entrepreneurs, resulting in extensive bank networks. This historical banking system played a crucial role in the postwar big-push policy which financed rapid industrialization by nationalizing the banking sector, because these commercial banks, even after being nationalized, continued to operate and expand new branches around the colonial bank networks in postwar Taiwan. We show that townships with
more nearby prewar bank branches tended to grow faster during the period of postwar rapid industrialization. We also demonstrate firm-level channels by examining the causal effect and the selection effect of loans.

Keywords: Colonialism, Bank Branch, Elite, State Capacity, Institutions, Industrialization

JEL Classification: G21, N25, O14, O17

Suggested Citation

Huang, Ching-I and Jheng, Shao-Yu, Inclusive Origins of Rapid Industrialization: the Persistent Effects of the Colonial Bank Networks on Taiwan’s Economic Miracle (December 10, 2021). Available at SSRN: https://ssrn.com/abstract=3982154 or http://dx.doi.org/10.2139/ssrn.3982154

Ching-I Huang (Contact Author)

National Taiwan University, Department of Economics ( email )

No. 1 Section 4, Roosevelt Road
Taipei, 106319
Taiwan

Shao-Yu Jheng

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
199
Abstract Views
1,532
rank
221,443
PlumX Metrics