Abstract
With the trend of globalization, the relations between domestic and international markets are more and more inseparable. Over the past decade, the stagnation of wage and employment in Taiwan have become striking. The benefits of globalization have been challenged. In this paper, we estimate the impacts of globalization on domestic labor market by using individual-level employee data over the period 1996 – 2010. We also link industry-level trade and foreign direct investment (FDI) data with individual-level data to construct the measures of globalization. Following Ebenstein et al. (2011), we examine the impacts of globalization on wages and labor market participation both across industries and occupations in Taiwan’s manufacturing sector. Based on Acemoglu and Autor’s (2010) classification of the routineness of each occupation, we examine the impacts of globalization on wages and employment of different types of workers. In addition, we also analyze the effects of FDI in downstream industries on labor market in the upstream industries. We find that the effects of trade and FDI on wages and employment are larger across occupations than across industries. Trade and FDI have negative substitution effects on domestic labor market. These effects are more pronounced for openness to high-income countries. Finally, FDI in the downstream industries has a positive effect on the wages of routine workers.