Working Paper: NBER ID: w25646
Authors: Katherine Eriksson; Katheryn Russ; Jay C. Shambaugh; Minfei Xu
Abstract: Using data over more than a century, we show that shifts in the location of manufacturing industries are a domestic reflection of what the international trade literature refers to as the product cycle in a cross-country context, with industries spawning in high-wage areas with larger pools of educated workers and moving to lower-wage areas with less education as they age or become “standardized.” We exploit the China shock industries as a set of industries that were in the late-stage product cycle by 1990 and show how the activity in those industries shifted from high-innovation areas to low-education areas over the 20th century. The analysis also suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on local education levels, and on local manufacturing wages. The risk of unemployment and detachment from the labor force rises most when a shock hits in areas where an industry already has begun phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate.
Keywords: No keywords provided
JEL Codes: F10; F16; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade shocks (F14) | local labor market resilience (J69) |
| local industry phase in product cycle (L60) | local labor market resilience (J69) |
| local education levels (I21) | local labor market resilience (J69) |
| local manufacturing wages (L69) | local labor market resilience (J69) |
| high wages (J31) | risk of unemployment (J64) |
| low educational attainment (I24) | risk of unemployment (J64) |
| greater proportion of college-educated workers (J69) | less severe labor market effects from trade shocks (F16) |
| timing of China shock (F69) | local economic characteristics (R11) |
| local economic characteristics (R11) | challenges from international competition (F23) |