Export Activity, Firm Size and Wage Structure: Evidence from Taiwanese Manufacturing Firms*

Abstract

This study adopts a semiparametric smooth coefficient model to evaluate the export–wage premiums, firm size–wage premiums, and the wage gap between skilled and unskilled labor. Particular focus is placed upon widespread evidence indicating that pay levels in ‘large’ and ‘export‐oriented’ firms are higher than in their ‘small’ and ‘domestic‐oriented’ counterparts. Applying the firm‐level data for Taiwanese manufacturing firms, we find a positive export–wage premium for skilled workers and a negative export–wage premium for unskilled workers. The hypothesis of a constant export premium across firm size is rejected. While most of the export–wage premiums for skilled labor can be attributed to the small and medium firms, the large exporting firms have a significant adverse effect on wages for unskilled labor. Moreover, our results suggest that the firm size–wage premiums for skilled workers are larger than those for unskilled workers. The wage gap between the two skill groups is also sensitive to size categories.