Localized Effects of the China Trade Shock: Is There an Effect on Consumer Expenditure?

31 Pages Posted: 19 Jan 2019

Date Written: January 2, 2019

Abstract

The paper contributes to a vast literature on the effects of recent rise in Chinese import competition on the U.S. local labor markets. The previous literature has shown that higher imports cause higher unemployment and reduced wages in local labor markets that house import-competing manufacturing industries. This paper revisits these findings and examines whether the exposure of local labor markets to increased import competition has an impact on local consumer expenditure. Using household scanner data, I show that the effect of the China trade shock on changes in local non-durable consumer expenditure in nominal and real terms are not distinguishable from zero. Moreover, I show that, in the period of 2000 to 2007, the localized China trade shock had a weak effect on average wages and median household income at the commuting zone level, which may explain why I observe no effect on household non-durable expenditure.

Keywords: China Shock, Household Expenditure, Scanner Data

JEL Classification: E21, E24, F14

Suggested Citation

Lazhevska, Nadiia, Localized Effects of the China Trade Shock: Is There an Effect on Consumer Expenditure? (January 2, 2019). Available at SSRN: https://ssrn.com/abstract=3313405 or http://dx.doi.org/10.2139/ssrn.3313405

Nadiia Lazhevska (Contact Author)

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
Stockholm
Sweden

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