Equalization effects of the expansion of labor-intensive exports: The caseof Taiwan

The periods of declining inequality in fast-growing Asian economies includi ng Japan, Hong Kong, Singapore, Taiwan, Korea, and Malaysia coincided with the periods of rapid expansion of labor-intensive exports and the accompany ing rise in employment. An investigation of the specific case of Taiwan in the postwar era further revealed that for both 1966 and 1976, wage disparit ies could be largely accounted for by the different premiums attached to sk ills, which reflected the individual characteristics of workers. Between 19 66 and 1976, narrowing disparities in the premiums attached to different ed ucation levels account for the largest part of the changes in wage inequali ty. It was found that this phenomenon was mainly due to the rapid expansion of employment by the export-oriented, unskilled-labor-intensive industries that exhausted surplus labor. The findings of the Taiwan case suggest the possibility of the absence of trade-off between low-skilled-labor-intensive industrialization and decreasing income inequality.