The Effects of Outsourcing and Foreign Direct Investment on Productivity and Wages-An Empirical Study of Taiwan''s Manufacturing

• Main Authors: Tsu-Hsien Huang, 黃慈嫺
• Other Authors: Po-Chin Wu
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/41829270952255834427

碩士 === 中原大學 === 國際貿易研究所 === 91 === With the growth of the economic openness in Mainland China, lower wages、plentiful resources and potential large consumer market in local area have become the most favorable inducement to appeal foreigners engaging in investment there. These years, like other foreign countries, many firms in Taiwan start to interact with firms in Mainland China through trade and FDI. Due to the increasing labor costs in Taiwan , we can observe more and more manufacturing firms starting to contract out parts of their production to firms in Mainland China. In the meanwhile, we also can see more and more foreign direct investment (FDI) outflows toward there. Obviously, the trend of increases in outsourcing and FDI outflows toward Mainland China will go on in the future. Thus, the purpose of this study is to propose a model to examine the effects of outsourcing and FDI on productivity and wages. By the fact, outsourcing is mostly concentrated in the manufacturing sector. So we’ll pay our attention to manufacturing industries in Taiwan. This paper follow Egger, Pfaffermayr, and Schnitzer (2001) to reestablish a total factor productivity equation and two wage equations by adding a new variable "FDI", and then, to measure the direct effects of outsourcing and FDI on productivity, how much of the direct effects on productivity is passed through to prices and the direct impacts of outsourcing and FDI on prices by utilizing pooled estimation. The important empirical results obtained from this study are as follows: Outsourcing and FDI participated by Taiwan''s manufacturing industries in Mainland China significantly have negative impacts on productivity and wages. Estimates of the wage regressions suggest that wages of low-skilled workers and high-skilled workers would be improved as a result of outsourcing and FDI, but the effect of outsourcing and FDI on capital rewards is not significant. Furthermore, increasing the degree of export-and-import-openness with respect to Mainland China will have positive influences on productivity and wages. As time goes by, nominal wages will increase spontaneously due to the exogenous neutral technological progress.