A Panel Study of Regional Unemployment in Taiwan: 1987-2001

Panels of regional unemployment data across different demographic groups are examined to explore the sources of the deterioration in employment in Taiwan during the past decade. The application of the two-factor fixed-effects estimation approach leads to two main findings. First, wide regional unemployment differentials do exist and appear as the differences in fixed effects. Second, regional unemployment rates are found to be highly correlated with the importation of foreign workers, the level of the minimum wage, and the extent of the enforcement of the Labor Standards Law. These findings together imply that, in addition to the demographic-specific and nation-wide macroeconomic policies, it is necessary to adopt a set of regionally-diversified policies that are aimed at promoting both regional economic growth and labor market flexibility.