Trade Shocks and the Shifting Landscape of U.S. Manufacturing

49 Pages Posted: 12 Mar 2019

See all articles by Katherine Eriksson

Katherine Eriksson

University of California, Davis

Katheryn Russ

University of California, Davis

Jay Shambaugh

Dartmouth College - Department of Economics; Georgetown University - Department of Strategy/Economics/Ethics/Public Policy

Minfei Xu

University of California, Davis

Multiple version iconThere are 2 versions of this paper

Date Written: March 2019

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.

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Suggested Citation

Eriksson, Katherine and Russ, Katheryn and Shambaugh, Jay and Xu, Minfei, Trade Shocks and the Shifting Landscape of U.S. Manufacturing (March 2019). NBER Working Paper No. w25646. Available at SSRN: https://ssrn.com/abstract=3350415

Katherine Eriksson (Contact Author)

University of California, Davis ( email )

Katheryn Russ

University of California, Davis ( email )

Department of Economics
Davis, CA 95616
United States

HOME PAGE: http://www.econ.ucdavis.edu/faculty/knruss/

Jay Shambaugh

Dartmouth College - Department of Economics ( email )

309 Rockefeller Hall
Hanover, NH 03755
United States
603-646-9345 (Phone)
603-646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~economic/faculty/Shambaugh/

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy

Washington, DC 20057
United States

Minfei Xu

University of California, Davis ( email )

One Shields Avenue
Davis, CA 95616
United States

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