The dynamics of regional labour markets in Taiwan, 1994-2007

This paper investigates the role of regions to the outcomes of Taiwan's labour market over the period 1994-2007 using panel data on average annual wage and unemployment across the country's 23 regions. While wage inequality is rising within regions, there is a wage convergence between regions, although the speed is very slow. The analysis on the degree of persistence of regional unemployment in Taiwan's regional labour markets is also provided. Furthermore, the existence of a wage curve in Taiwan is somewhat controversial, although its pattern has been found in more than 40 countries. Using a panel two-stage least squares method, we find that there is no significantly negative relationship between wages and unemployment in Taiwan.