Export activity, firm size and wage structure: Evidence from Taiwanese manufacturing firms

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.