The Rise of the East and the Far East: German Labor Markets and Trade Integration

39 Pages Posted: 7 Jul 2012

See all articles by Wolfgang Dauth

Wolfgang Dauth

Institute for Employment Research (IAB)

Sebastian Findeisen

University of Zurich; IZA Institute of Labor Economics

Jens Suedekum

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

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Abstract

We analyze the effects of the unprecedented rise in trade between Germany and "the East" – China and Eastern Europe – in the period 1988-2008 on German local labor markets. Using detailed administrative data, we exploit the cross-regional variation in initial industry structures and use trade flows of other high-income countries as instruments for regional import and export exposure. We find that the rise of "the East" in the world economy caused substantial job losses in German regions specialized in import-competing industries, both in manufacturing and beyond. Regions specialized in export-oriented industries, however, experienced even stronger employment gains and lower unemployment. In the aggregate, we estimate that this trade integration has caused some 493,000 additional jobs in the economy and contributed to retaining the manufacturing sector in Germany. We also conduct our analysis at the individual worker level, and find that trade had a stabilizing overall effect on employment relationships.

Keywords: international trade, import competition, export opportunities, local labor markets, employment, China, Eastern Europe, Germany

JEL Classification: F16, J31, R11

Suggested Citation

Dauth, Wolfgang and Findeisen, Sebastian and Südekum, Jens, The Rise of the East and the Far East: German Labor Markets and Trade Integration. IZA Discussion Paper No. 6685. Available at SSRN: https://ssrn.com/abstract=2101952

Wolfgang Dauth (Contact Author)

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

HOME PAGE: http://www.iab.de/en/ueberblick/mitarbeiter.aspx/Mitarbeiter/603

Sebastian Findeisen

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Jens Südekum

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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