On the puzzling slowdown of wage and productivity growth in Taiwan: Evidence from a comparison with South Korea

Since the early 2000s, the growth rate of real wages in Taiwan has been very low, even negative for high-skilled workers. This paper sheds light on the potential causes of this puzzling development through a comparison of Taiwan's performance with that of South Korea. In many dimensions, most notably wages and labour productivity, both economies developed quite similarly between 1995 and 2001-02, but diverged thereafter. We relate the development of wages and labour productivity in the two economies to sectoral structural change and to sectoral differences in labour productivity growth, skills upgrading, and foreign trade.

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