Work or Crook: The Socioeconomic Consequences of the Export Slowdown in China

Abstract

This paper highlights the criminogenic consequence of the remarkable slowdown in China’s export growth in recent years. Applying a textual analysis to millions of judgment documents at all levels of courts in China, we construct measures of crime rates that vary across cities over time. Estimations using a shift-share instrumental variable find higher crime rates in cities that experience a more severe export slowdown. The effects are more pronounced in regions specializing in manufacturing, which has a larger share of the young and migrant population. Negative export shocks also cause shrinking job opportunities, declining labor earnings, and rising labor disputes. Alternative mechanisms, such as spending on social stability, seem to play a minor role. A back-of-the-envelope calculation based on our baseline estimation suggests that approximately 11.6% of the interquartile difference in crime rates across cities can be explained by the difference in their exposure to the export slowdown.

Keywords: Export slowdown, crime,courts, economic shocks, labor market conditions, shift-share instruments

JEL Classification: F10, F14, F16, K42