The Effects of Global Competition from China on Taiwanese Labor Market

Abstract

This paper investigates how intensified global competition from Chinese products affect Taiwanese labor market from 1990 to 2011. We find that intensified Chinese competition is associated with a decrease in manufacturing employment, with the brunt of impacts borne by low- and middle- education level workers. We also find that a lengthier industry quality can shield low-education level workers from more competition, but initially quality advantageous industries are more likely to lower low-education level worker employment when facing increasing Chinese competition. Our wage regressions suggest that among manufacturing industries an increase in Chinese competition does not affect high-education level workers’ wages but is associated with a decrease in non-high education level workers’ wages. We further find that while workers with less desirable human capital might be forced to leave with intensified competition, those most capable workers are also more likely to leave manufacturing, probably voluntarily doing so in order to avoid future competition.