Does Trade Promote Gender Wage Equity? Evidence from East Asia

Abstract

During the last several decades, industry and export mixes in Taiwan and South Korea have shifted toward higher-skill, technology-intensive products, while lower-skill, labor-intensive industries have been moving abroad. At the same time, women’s relative educational attainment and skill levels improved considerably. Yet some trends have differed across these two economies. Taiwan became increasingly open to trade, with a steady rise in the total trade to output ratio from a low of 48 percent in the early 1980s to a high of almost 90 percent by the late 1990s. Against this backdrop, Taiwan’s average female—male wage ratio in manufacturing dropped fairly steadily from 66 percent in 1981 to 60 percent in 1993. Only in the mid-1990s did the wage ratio begin a strong climb upward, reaching 67 percent by 1999. In contrast, Korea’s slow and steady improvement in women’s relative wages — from 47 percent in 1980 to 58 percent by 1998 — was accompanied by a slight decline in trade openness.¹ Industrial structure and policy also differ between the two economies, with Taiwan having a higher proportion of small firms and relatively less emphasis on selective government intervention. These divergent features in two of the most successful practitioners of the export-led growth model make Taiwan and Korea well-suited to examine the impact of international trade competition on the gender wage gap.