Any Port in a Storm: Import Competition and Match Quality Downgrading

41 Pages Posted: 13 Feb 2020

See all articles by Jeff Chan

Jeff Chan

Wilfrid Laurier University

Date Written: January 23, 2020

Abstract

This paper provides clear evidence that increased exposure to import competition from low-income countries results in lower quality matches between workers and firms, using matched employer-employee data from Italy. I measure match quality as the match (worker-firm) fixed effect from a wage regression that includes a rich set of time-varying observables, as well as worker and firm fixed effects. In order to account for the potential endogeneity of industry-level imports, I use low-income countries' import share in a set of other high-income countries as an instrumental variable. Import shocks reduce match quality, shifting the entire distribution of match effects leftward. Additional analysis suggests that workers are more likely to leave high-quality matches because of import competition, implying that good worker-firm matches become relatively less valuable. This finding highlights a new channel through which workers can be negatively affected by trade shocks.

Keywords: import competition, match quality

JEL Classification: F1, F6, F14, F16, J20

Suggested Citation

Chan, Jeff, Any Port in a Storm: Import Competition and Match Quality Downgrading (January 23, 2020). Available at SSRN: https://ssrn.com/abstract=3521608 or http://dx.doi.org/10.2139/ssrn.3521608

Jeff Chan (Contact Author)

Wilfrid Laurier University ( email )

75 University Avenue West
Waterloo, Ontario N2L 3C5
Canada

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