Working Paper: CEPR ID: DP11054
Authors: David Autor; David Dorn; Gordon H. Hanson
Abstract: Abstract China?s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.
Keywords: China; International Trade; Labor Markets
JEL Codes: F16; H55; J23; J31; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Exposure to import competition from China (F69) | Significant job losses in U.S. manufacturing industries (F66) |
| One-percentage-point increase in industry import penetration (F14) | Domestic industry employment reduction (L69) |
| Greater import competition (F14) | Increase in unemployment rates (F66) |
| Greater import competition (F14) | Decrease in labor force participation rates (J21) |
| Decline in manufacturing employment (O14) | Increase in unemployment and out-of-labor-force rates (J64) |