Labor Market Implications of Taiwan's Accession to the WTO: A Dynamic Quantitative Analysis

Pao-Li Chang (), Yi-Fan Chen (), Wen-Tai Hsu () and Xin Yi ()
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Pao-Li Chang: Singapore Management University, Postal: School of Economics, Singapore Management University, 90 Stamford Road, Singapore 178903
Yi-Fan Chen: National University of Kaohsiung, Postal: Department of Applied Economics, National University of Kaohsiung, 700 Kaohsiung University Rd., Nanzih District, Kaohsiung 811, Taiwan
Wen-Tai Hsu: Academia Sinica, Postal: §Research Fellow, Institute of Economics, Academia Sinica, 128, Section 2, Academia Road, Nangang, District, Taipei City, 115, Taiwan
Xin Yi: Singapore Management University, Postal: School of Economics, Singapore Management University, 90 Stamford Road, Singapore 178903

No 7-2022, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: We study the effects of Taiwan’s accession to the WTO in 2002 on the labor market dynamics in Taiwan during 1995–2020. Based on the dynamic hat algebra of Caliendo, Dvorkin and Parro (2019), we modify the framework to allow for differently skilled labor inputs (low, middle, high) and sector-skill dynamic choice by workers. We map the model to the labor-market transition data in Taiwan (based on quasi-longitudinal household surveys), the country-sector-specific skill shares in production, and the bilateral trade flows and import tariffs, for 61 economies and 22 sectors for the period 1995–2007. We study the counterfactual dynamics if the bilateral tariffs related to Taiwan’s imports and exports were rolled back to their levels in 1995, and calculate the cumulative effects on the employment shares and on the welfare of workers by sector and skill. We find the tariff reductions during this period to explain very much the observed expansion of Taiwan’s MCEE and business services sectors in their employment shares, and the growing share of high-skilled workers in Taiwan’s labor composition. We also conduct alternative counterfactuals to evaluate the effects of bilateral tariff concessions between Taiwan and China only, China’s WTO accession, and combined accessions by both Taiwan and China. We find bilateral tariff concessions to account for the bulk of the effects of Taiwan’s WTO accession, illustrating the importance of China to Taiwan in the latter’s trade structure.

Keywords: WTO; Dynamic Quantitative Analysis; Labor Market Dynamics; Welfare Effects; Mobility Frictions; Skill Upgrading (search for similar items in EconPapers)
JEL-codes: E24 F13 F14 F16 F17 (search for similar items in EconPapers)
Pages: 87 pages
Date: 2022-04-29
New Economics Papers: this item is included in nep-cna, nep-int and nep-sea
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