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

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  • Yu Cheng Lai
  • Santanu Sarkar

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. JEL Code: J28, J38, F66

Suggested Citation

  • Yu Cheng Lai & Santanu Sarkar, 2022. "The role of labour unrest and skilled labour on outward foreign direct investment in Taiwan, Republic of China, ROC," The Economic and Labour Relations Review, , vol. 33(2), pages 396-414, June.
    • Handle: RePEc:sae:ecolab:v:33:y:2022:i:2:p:396-414
    DOI: 10.1177/10353046211066932
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    More about this item

    Keywords

    Outward foreign direct investment; labour unrest; skilled workers; wages; Taiwan;
    All these keywords.

    JEL classification:

    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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