The China Syndrome: Local Labor Market Effects of Import Competition in the United States
63 Pages Posted: 3 May 2012
Date Written: May 2, 2012
We analyze the effect of rising Chinese import competition between 1990 and 2007 on local U.S. labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization while instrumenting for imports using changes in Chinese imports by industry to other high-income countries. Rising exposure increases unemployment, lowers labor force participation, and reduces wages in local labor markets. Conservatively, it explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in exposed labor markets.
Keywords: Trade Flows, Import Competition, Local Labor Markets, China
JEL Classification: F16, H53, J23, J31
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