Labour Market Characteristics and Surviving Import Shocks

28 Pages Posted: 16 Apr 2019

See all articles by Jeff Chan

Jeff Chan

Wilfrid Laurier University

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

This paper investigates whether different labour market characteristics amplify or dampen the local labour market impacts from Chinese import competition exposure. I exploit state‐level variation in initial, pre‐shock labour market characteristics and regional variation across local labour markets in exposure to Chinese imports for identification. I find that local labour markets in states with higher union density experience more severe adverse consequences as a result of increased import exposure. Conversely, higher initial minimum wages help mute the negative impacts of the China shock. I also provide some evidence that exceptions to employment‐at‐will legislation can affect employment responses to increased Chinese imports. Finally, examining all policies together in an index, I show that higher levels of policies intended to benefit and protect workers can actually magnify the extent of the damage inflicted by import competition. My results suggest that initial labour market characteristics and policies can play an important role in understanding why local labour markets react differently to trade shocks.

Suggested Citation

Chan, Jeff, Labour Market Characteristics and Surviving Import Shocks (May 2019). The World Economy, Vol. 42, Issue 5, pp. 1288-1315, 2019, Available at SSRN: https://ssrn.com/abstract=3372535 or http://dx.doi.org/10.1111/twec.12781

Jeff Chan (Contact Author)

Wilfrid Laurier University ( email )

75 University Avenue West
Waterloo, Ontario N2L 3C5
Canada

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