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By considering heterogeneity in abilities and self-selection in educational choice, this paper adopts the heterogeneous human capital model to estimate rate of return to university education using data from the 1990 and 2000 Taiwan's Manpower Utilization Surveys. The Taiwan empirical study shows that significant heterogeneous return to education does exist, and that the educational choice was made according to the principle of comparative advantage. The estimated rates of return for attaining university were 19% and 15%, much higher than the average rate of return of 11.55 and 6.6%, for 1990 and 2000, respectively. The declining trend of return to university education may have been caused by the rapid expansion of the number of colleges and universities and the increasing supply of college graduates in the 1990s.

One of the important trade effects on growth is technology diffusion through learning by doing. Chuang [1998] proposed a trade-induced learning theory in which the nature of traded goods and the trading partners are two key factors determining the effectiveness of the trade-induced learning. The former conveys the characteristics that a country can learn; the latter determines the level of technology from which a country can learn. Using cross-country data, this article constructs a set of the trade-induced learning variables by taking into account trading partners and the characteristics of the traded goods and further tests the trade induced learning hypothesis. The results show that holding other variables constant, trade-induced learning has a positive and significant effect on growth and the estimated effect implies that a one-standard-deviation increase in the trade-induced learning variable is estimated to generate an effect of between 0.4 to 1.0 percentage points on the annual growth rate. A robustnes s test shows that the trade-induced learning variable passes the extreme bound analysis and also outperforms other conventional trade variables advocated in the literature., I. INTRODUCTION After the Second World War, some of the developing countries have experienced miraculous economic growth. The so-called Newly Industrialising Economies (NIEs) such as Taiwan, South Korea, Hong Kong [...]

Using aggregate and two-digit manufacturing industry data from Taiwan this article reconfirms the existence of strong external economies among industries, and shows that these external economies can be largely attributed to the economy-wide trade-induced learning generated from opening trade with developed countries. The trade-induced learning accounts for about half to three-quarters of the measured external effects in Taiwan's two-digit industries. We also find that imports and exports of machinery from and to developed countries (mainly the USA and Japan) bear the greatest trade-induced learning for Taiwan's manufacturing industries. As trade has both factor accumulation and productive efficiency effects and both effects are likely mutually reinforced, we find that over 40 per cent of output growth of Taiwan's manufacturing during 1975-90 is due to trade-induced learning which is not explained by the total factor inputs, denoting changes in technology or total factor productivity., I. INTRODUCTION An externality mechanism plays an important role in most endogenous growth models (for example, demand spillover [Murphy, Shleifer, and Vishny, 1989]; knowledge spillover [Romer, 1986; 1990; Lucas, 1988; [...]

Using Taiwanese firm-level data, we confirm that foreign direct investment and R&D have a positive impact, or spillover effect, on productivity. Furthermore, labour quality, firm size, market structure, and export orientation all affect a firm's productivity. Applying Heck man's [1976] two-stage estimation method, we find that firms self-select into R&D or non-R&D groups. After correcting for this selection bias, we find that foreign direct investment, local technology purchase, and outward foreign investment are substitutes to R&D activity. These results are mainly due to the significant effect of industry-wide technology spillovers. The major policy implications derived from this study are that governments in developing countries may first wish to adopt policies encouraging foreign direct investment to foster technology transfer and industry-wide knowledge spillovers in the short run. However, once the country's technological capability is established it appears critical to switch towards policies that provide a preferred environment to stimulate R&D investment (for example, infrastructure improvement and protection of intellectual property rights) to allow for sustainable economic growth., I. INTRODUCTION Many endogenous growth models have emphasised technology transfer from the North to the South as a vehicle for productivity growth of the South [e.g., Segerstrom, 1991; Grossman and [...]