The Effects of Globalization on Labor Shares - Some Evidence from Taiwan's Manufacturing Industries

Taiwan has been experiencing fast globalization after the mid-1990s; Taiwan's labor share of income has also reached a peak in 1995 and has begun to fall since then. The purpose of this paper is to examine whether globalization is the main triggering factor for the falling labor shares in Taiwa...

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Bibliographic Details
Published in:Jing ji lun wen cong kan 2020-09, Vol.48 (3), p.421-451
Main Authors: Liu, Bih Jane, Yang, Tzu-Han, Huang, Deng-Shing
Format: Article
Language:chi ; eng
Subjects:
Exports
Foreign investment
Globalization
Manufacturing
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Summary:Taiwan has been experiencing fast globalization after the mid-1990s; Taiwan's labor share of income has also reached a peak in 1995 and has begun to fall since then. The purpose of this paper is to examine whether globalization is the main triggering factor for the falling labor shares in Taiwan's manufacturing industries. We show that manufacturing industries' adoption of more capital-intensive technology and increasing cumulative FDI to mainland China as a result of globalization are the two main factors causing the labor shares in Taiwan's manufacturing industries to fall. This is consistent with the findings in most previous literature. However, Taiwan's exports to China and cumulative FDI to countries other than China tend to raise labor shares, which is different from past findings. By breaking down the changes in labor shares, we find that because of the unique economic situation that Taiwan faces, the explanation for our empirical results (regardless of whether or not they are consistent with the literature) may differ from those provided by the literature.
ISSN:1018-3833
DOI:10.6277/TER.202009_48(3).0004