Abstract Since the late 1990s, internal changes and external challenges have disrupted the balance between labour demand and labour supply and led to the growth of unemployment in Taiwan. Thus, the unemployment rate increased 174% and the long-term unemployment rate increased almost 663% during the period from 1991 to 2008. Unemployment has occurred among not only unskilled workers or disadvantaged minorities, but also among some parts of the middle class or skilled workers with middle or above educational attainment. In order to combat unemployment, policy change occurred in the late 1990s. The target groups were middle-aged populations, women, youths, aborigines, disabled people, and insiders on unpaid leave. The main emphases in Taiwanese activation schemes included incentive reinforcement, employment assistance, job creation, and human capital investment. This study focuses on the process of developing and formulating activation policies and seeks to understand why and how activation policies emerged in Taiwan. The methods here consist of: (1) documentary analysis of media sources, research reports, official publications, and legislative proceedings focusing upon issues related to unemployment, and (2) semi-structured interviews with 45 key informants in the in the policy process. This thesis concludes that the economic and social context, institutional constraints, bureaucratic practices, and dominant ideologies in the Taiwanese welfare regime played a decisive role in the process of shaping labour market policies. In addition, the findings reflects the reorientation of policy in Taiwan towards welfare reform, including an increasing role for the state in welfare provision, increased attention to social and community needs, the promotion of corporate social responsibility, and an increased emphasis upon the avoidance of 'welfare dependency', the maintenance of traditional family norms, and investments in human and social capital.