Hostname: page-component-848d4c4894-v5vhk Total loading time: 0 Render date: 2024-06-21T09:23:10.717Z Has data issue: false hasContentIssue false
  • English
  • Français

The role of labour unrest and skilled labour on outward foreign direct investment in Taiwan, Republic of China, ROC

Published online by Cambridge University Press:  01 January 2023

Yu Cheng Lai  and
Santanu Sarkar Open the ORCID record for Santanu Sarkar [Opens in a new window]
Yu Cheng Lai
Affiliation:
Shih Chien University, Kaohsiung, Taiwan
Santanu Sarkar*
Affiliation:
XLRI Xavier School of Management, Jamshedpur, India
*
Santanu Sarkar, XLRI Xavier School of Management, XLRI Jamshedpur School of Business and Human Resources, C H Area East, Jamshedpur 831035, India. Email: ssarkar@xlri.ac.in
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper builds an estimation model to test whether improved labour standards necessarily lead firms to send work offshore to countries with lower wages and fewer employment protections; or improved labour standards influence the labour market, where with time, firms attract more skilled workers, which help deter outward foreign direct investment (FDI). When more firms comply with improved labour standards, the industrial relations climate also improves as non-compliance usually causes labour unrest. Using a model built on pooled cross-sectional time-series data from 2008–17, we studied the role of changes in labour unrest and the percentage of skilled workers in the labour force in predicting outward FDI in Taiwan. Per our estimation model, we found the percentage of skilled workers steadily increased as Taiwan maintained improved labour standards. The increase in skilled workers also increased labour costs making it challenging for firms to stay onshore. However, skilled workers helped firms improve productivity, which justified increased labour costs. As a result, firms in Taiwan that complied with labour standards found it less challenging to pay higher wages and stayed onshore.

Keywords

Outward foreign direct investmentlabour unrestskilled workerswagesTaiwanJ28J38F66
Type
Industry, skills and investment
Information
The Economic and Labour Relations Review , Volume 33 , Issue 2 , June 2022 , pp. 396 - 414
Copyright
Copyright © The Author(s) 2021

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Asiedu, E (2006) Foreign direct investment in Africa: the role of natural resources, market size, Government policy, Institutions and political instability. The World Economy 29(1): 63–77.CrossRefGoogle Scholar
Banga, R (2008) Drivers of outward foreign direct investment from Asian developing economies. Asia Pacific Trade and Investment Review Chapter VII: 195–215.Google Scholar
Bano, S, Tabbada, J (2015) Foreign direct investment outflows: Asian developing Countries. Journal of Economic Integration 30(2): 359–398.CrossRefGoogle Scholar
Blomström, M, Kokko, A (2000) Outward investment, employment, and wages in Swedish multinationals. Oxford Review of Economic Policy 16(3): 76–89.Google Scholar
Braunstein, E (2006) Foreign Direct Investment, Development and Gender Equity: A Review of Research and policy. UNRISD Occasional Paper No. 12. Geneva: United Nations Research Institute for Social Development.Google Scholar
Braunstein, E, Brenner, M (2008) Foreign direct investment and gendered wages in urban China. Feminist Economics 13(3–4): 213–237.CrossRefGoogle Scholar
Buckley, PJ, Clegg, LJ, Cross, AR, et al. (2007) The determinants of Chinese outward foreign direct investment. Journal of International Business Studies 38(4): 499–518.Google Scholar
Bui, TMH, Vo, XV, Bui, DT (2018) Gender inequality and FDI: empirical evidence from developing Asia-Pacific countries. Eurasian Economic Review 8(3): 393–416.CrossRefGoogle Scholar
Busse, M, Nunnenkamp, P, Spatareanu, M (2011) Foreign direct investment and labour rights: a panel analysis of bilateral FDI flows. Applied Economics Letters 18(2): 149–152.CrossRefGoogle Scholar
Central Bank of Republic of China [ROC] (2020) Annual Average Exchange Rate. Taipei: Central Bank, Government of Taiwan.Google Scholar
Chan, A (2003) Racing to the bottom: international trade without a social clause. Third World Quarterly 24(6): 1011–1028.Google Scholar
Chu, J-j (2001) Labour militancy in Taiwan: export integration vs authoritarian transition. Journal of Contemporary Asia 31(4): 441–465.CrossRefGoogle Scholar
Cramton, P, Mehran, H, Tracy, JS (2008) ESOP Fables: The Impact of Employee Stock Ownership Plans on Labour Disputes. Staff Report 347. Federal Reserve Bank of New York. Available at: https://www.newyorkfed.org/research/staff_reports/html (accessed 20 May 2021).Google Scholar
Driffield, N, Love, JH, Taylor, K (2009) Productivity and labour demand effects of inward and outward Foreign direct investment on Uk industry. The Manchester School 77(2): 171–203.CrossRefGoogle Scholar
Elia, S, Mariotti, I, Piscitello, L (2009) The impact of outward FDI on the home country’s labour demand and skill composition. International Business Review 18(4): 357–372.CrossRefGoogle Scholar
Haskel, JE, Pereira, SC, Slaughter, MJ (2007) Does inward foreign direct investment boost the productivity of domestic firms? Review of Economics and Statistics 89(3): 482–496.CrossRefGoogle Scholar
Hayakawa, K, Matsuura, T, Motohashi, K, et al. (2013) Two-dimensional analysis of the impact of outward FDI on performance at home: Evidence from Japanese manufacturing firms. Japan and the World Economy 27(C): 25–33.Google Scholar
Huang, SC, Lin, CC (2013) Outward FDI to China and the parent firm’s ability to create value-added per worker. In: Foreign Direct Investment (FDI): Policies, Economic Impacts and Global Perspectives. Hauppauge, NY: Nova Science Publishers, Inc., 103–125.Google Scholar
International Labor Organization [ILO] (2014) Skilled labour –– A determining factor for sustainable growth of the Nation. Policy Brief –– Institute of Labour Science and Social Affairs 1.Google Scholar
Kapsos, S. (2006) The employment intensity of growth: Trends and macroeconomic determinants. In: Labor Markets in Asia. London: Palgrave Macmillan, 143–201.CrossRefGoogle Scholar
Killingsworth, MR (1983) Labor Supply. Cambridge: Cambridge University Press, Vol. 1.CrossRefGoogle Scholar
Kochan, T (1996) Shaping employment relations for the 21st century: challenges facing business, labour, and government leaders. In: Lee, J, Verma, A (eds) Changing Employment Relations in Asian Pacific Countries. Taipei, Taiwan: Chung-Hua Institution for Economic Research, 135–160.Google Scholar
Kokko, A (2006) The Home Country Effects of FDI in Developed Economies. Stockholm: European Institute of Japanese Studies.Google Scholar
Kolstad, I, Wiig, A (2012) What determines Chinese outward FDI? Journal of World Business 47(1): 26–34.Google Scholar
Lai, Y-C, Masters, S (2005) The effects of mandatory maternity and pregnancy benefits on women’s wages and employment in Taiwan, 1984-1996. ILR Review 58(2): 274–281.CrossRefGoogle Scholar
Lai, YC, Sarkar, S (2013) Labor market effects of work‐sharing arrangements in Taiwan, ROC. International Journal of Manpower 34(6): 635–657.Google Scholar
Lai, YC, Sarkar, S (2016) Effects of paid parental leave allowance on labour market outcomes in Taiwan. International Journal of Information and Management Science 27(4): 379–403.Google Scholar
Lai, Y-C, Sarkar, S (2017) Gender equality legislation and foreign direct investment. International Journal of Manpower 38(2): 160–179.Google Scholar
Lee, H-Y, Lin, KS, Tsui, H-C (2009) Home country effects of foreign direct investment: from a small economy to a large economy. Economic Modelling 26(5): 1121–1128.CrossRefGoogle Scholar
Lee, JS, Wu, HL (1996) The 1984 Fair Labour Standards Law and its impact on industrial development in the Republic of China on Taiwan. In: Lee, JS (ed) Labour Standards and Economic Development. Taipei: Chung-Hua Institution for Economic Research, 147–172.Google Scholar
Lin, CC (2004) The Effect of FDI in Domestic Employment –– Research of Taiwanese Investors in Mainland China. Masters Thesis, National Sun Yat-sen University, Kaohsiung, Taiwan.Google Scholar
Lin, C-J (2015) The reconstructing of industrial relations in Taiwan’s high technology industries. Journal of Contemporary Asia 45(2): 294–310.Google Scholar
Morck, R, Yeung, B, Zhao, M (2008) Perspectives on China’s outward foreign direct investment. Journal of International Business Studies 39: 337–350.CrossRefGoogle Scholar
National Statistics Republic of China [ROC] (2008-2017) Manpower Utilization Survey. Taipei: Manpower Survey Section, Department of Census, Directorate General of Budget, Accounting and Statistics, Government of Taiwan.Google Scholar
National Statistics Republic of China [ROC] (2020) Annual GDP by Industry and Annual CPI. Taipei. Department of Census, Directorate General of Budget, Accounting and Statistics, Government of Taiwan.Google Scholar
Noorbakhsh, F, Paloni, A, Youssef, A (2001) Human capital and FDI inflows to developing countries: new empirical evidence. World Development 29(9): 1593–1610.CrossRefGoogle Scholar
Organization for Economic Co-operation and Development [OECD] (2013) Emerging Asian economies expected to remain resilient but structural reform critical, says new Economic Outlook for Southeast Asia, China and India. OECD Newsroom. Available at: https://www.oecd.org/newsroom/seaopr.htm (accessed 7 September 2021).Google Scholar
Sarkar, S, Lai, YC (2009) Foreign direct investment, spillovers and output dispersion - the case of India. International Journal of Information and Management Sciences 20(4): 491–503.Google Scholar
Sarkar, S, Liu, M (2019) How the changing relationship between labour and political party influenced growth of autonomous labour unions in Taiwan. Employee Relations: The International Journal 41(4): 758–772.CrossRefGoogle Scholar
Seguino, S (2000) The effects of structural change and economic liberalisation on gender wage differentials in South Korea and Taiwan. Cambridge Journal of Economics 24(4): 437–459.Google Scholar
Seguino, S (2003) Gender Equality through Labor Standards and Living Wages: An Exploration of the Issues for Asian SIEs. MPRA Paper 6508. Available at: https://mpra.ub.uni-muenchen.de/6508/2/MPRA_paper_6508.pdf (accessed 10 May 2021).Google Scholar
Sikka, P, Willmott, H (2010) The dark side of transfer pricing: Its role in tax avoidance and wealth retentiveness. Critical Perspectives on Accounting 21(4): 342–356.CrossRefGoogle Scholar
Tcha, M (1998) Labor disputes and direct Foreign investment: the experience of Korea in transition. Economic Development and Cultural Change 46(2): 305–327.CrossRefGoogle Scholar
United Nations Conference on Trade and Development [UNCTAD] (2019) World Investment Report. New York: United Nations Publications.Google Scholar
Yearbook of Labour Statistics Republic of China [ROC] (2008-2017) Annual Labour Disputes Involved Rates. Department of Statistics, Ministry of labour. Taipei: Ministry of labour, Government of Taiwan.Google Scholar
Yearbook of Statistics Republic of China [ROC] (2008-2017) Annual Statistics on Approved Outward Investment by Industries. Yearbook of Statistics, Investment Commission, MOEA. Taipei: Ministry of Economic Affairs, Government of Taiwan.Google Scholar
Supplementary material: File

Lai and Sarkar supplementary material
Download undefined(File)
File 400.9 KB