With ongoing economic development and increasing capital intensity in Taiwan, the accumulation of human resources needs now to focus more on skill requirements. From a time series perspective, this paper weighs the question of whether physical capital is more complementary to skilled workers than to unskilled workers in Taiwan. In this paper, capital-skill complementarity is tested according to the definitions of skill, of salaried workers and of wage earners. Data from 18 manufacturing industries from the 1973 to 1995 period are employed. Using the Kmenta approximation for the CES function, strong support for complementarity between wage earners and capital is implied. This surprising result suggests that the shortage of unskilled workers (wage earners) will be more serious than that of skilled workers (salaried workers). In fact, it is shown that even with increasing capital intensity and technological progress, the unskilled worker shortage problem will continue to harm production activity in Taiwan.
