Time‐Series Wage Differential in Taiwan: The Role of International Trade

Been-Lon Chen and Mei Hsu

Review of Development Economics, 2001, vol. 5, issue 2, 336-354

Abstract: Rising relative wages between skilled and unskilled workers in developed countries has been a popular subject of recent studies. This paper analyzes Taiwan, a semi‐developed economy, where the relative wage reveals a declining trend since the mid‐1980s. The authors study the role of international trade. A major point of departure is to distinguish the effects of net exports to OECD countries from those to non‐OECD countries. The paper also differentiates the effects of net exports to China from those to non‐OECD countries except China. It is found that net exports to the OECD countries raise the relative wage of skilled workers, whereas net exports to non‐OECD countries and China diminish the relative wage. Moreover, the impacts of net exports to China are much larger than those to OECD and other non‐OECD countries. The documented wage effects of international trade in this work diverge from what existing works have argued based on Heckscher–Ohlin theory.

Date: 2001
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