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National identity under economic integration


This study empirically investigates how economic integration influences individuals’ national identity. Due to historical reasons and unique cross-strait politics, some people in Taiwan identify themselves as Chinese while others identify themselves as Taiwanese. Using individual survey data with the outward investment data at the industry level from 1992 to 2009, we find that the rising investment in China has strengthened Taiwanese identity and has reduced the probability of voting for the Pan-Blue parties. The effects are much stronger for unskilled workers than for skilled workers, suggesting that outward investment in China may not only have economic impact on the economy but may also deepen the political polarization in Taiwan.

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  1. In recent studies, for example, Masella (2013) suggests that ethnic diversity does not necessarily weaken national identity. Georgiadis and Manning (2012) find that people who feel that they are treated with respect are more likely to identify with the wider society. Constant and Zimmermann (2013) provide comprehensive review and discussion of the formation and divergence/reconciliation of national and ethnic identities.

  2. Similar findings in Korea were presented by Debaere et al. (2010), who show that investing in a country less advanced than the home country has negative effects on employment.

  3. Esses et al. (2001) find that perceived group competition fosters a negative attitude toward immigrants. Chen and Li (2009) find that cooperation on task completion can induce group identity in experiments.

  4. For example, the article “China causes Taiwan brain drain” by the Financial Times on March 31, 2013, mentioned industrial “hollowing out,” the wage stagnation of factory workers, and the brain drain of educated workers.

  5. Depreciation rate was set at 10% in the studies of Kydland and Prescott (1982) and Greenwood et al. (1988). According to Albonico et al. (2014), most capital depreciation rates estimated in studies are between 8 to 13%. In our section of robustness checks, we add results based on depreciation rate equal to 8% and depreciation rate equal to 12%.

  6. Ideally, we would like to construct our variable as cumulated outward investment over domestic capital stock at industry level. However, we do not find capital stock data by industry to match with our 35 industry categories.

  7. Non-workers are mainly students, housewives, and retired people. Among non-workers, the proportion of middle-aged men is only around 5%. We estimated a model on non-workers with the “average” investment across all industries and other demographic variables. The effect of the average investment is not significant while the effects of other demographic variables are not far from the effects we find in Table 2.


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Special thanks to the editor and three anonymous referees whose comments and suggestions helped improve and clarify this manuscript. We thank Shiu-Sheng Chen, Ming-Jen Lin, Ming-Ching Louh, and the seminar participants at NTU and Academia Sinica for their helpful comments. We also thank Yu-Hsuan Wang for excellent research assistance. All errors remain ours.


We acknowledge financial support from Ministry of Science & Technology (MOST107-3017-F-002-004) and Ministry of Education (NTU-107L900203).

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Correspondence to Chun-Fang Chiang.

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Responsible editor: Klaus F. Zimmermann



Table 7 Table of industry categories

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Chiang, CF., Liu, JT. & Wen, TW. National identity under economic integration. J Popul Econ 32, 351–367 (2019).

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  • Identity
  • Economic integration
  • Voting behavior

JEL classification

  • F50
  • Z10
  • D72