The Effects of Deepening Political and Economic Ties Between China and Taiwan on Taiwan’s Economic Growth

Abstract

Increasing economic and political integration with China has important implications for Taiwan’s continued independence. My thesis constructs proxies for deepening political and economic ties and measures their impact on the growth rates of countries, with particular attention on Taiwan. I analyze panel data on 20 countries with differing levels of integration with China from 1994 to 2009 using both OLS and fixed effects regressions with GDP per capita growth rate as the dependent variable. Using standard controls, I am able to isolate the effect of the constructed proxies on economic growth. The evidence suggests trade with China has a positive and significant impact on growth rates.