International Trade, Productivity Growth, Education and Wage Differentials: A Case Study of Taiwan.

The source of changes in the wage differential between skilled and unskilled labor has been an important subject of debate for several decades. International trade and productivity growth are two main causes that have been suggested from large country studies. Recent research proposes education as another influence. All three causes have been significantly associated with Taiwan's economic development. This paper attempts to contribute to the literature by investigating wage differentials of Taiwan, a small open economy with a paucity of study on the issue of trade and wages. An Error Correction Model (ECM) incorporating both short and long term run effects is employed.