The China Syndrome: Local Labor Market Effects of Import Competition in the United States

67 Pages Posted: 26 Jan 2013

See all articles by David H. Autor

David H. Autor

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

David Dorn

University of Zurich - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

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Abstract

We analyze the effect of rising Chinese import competition between 1990 and 2007 on U.S. local labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization and instrumenting for U.S. imports using changes in Chinese imports by other high-income countries. Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import-competing manufacturing industries. In our main specification, import competition explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.

Keywords: trade flows, import competition, local labor markets, China

JEL Classification: F16, H53, J23, J31

Suggested Citation

Autor, David H. and Dorn, David and Hanson, Gordon H., The China Syndrome: Local Labor Market Effects of Import Competition in the United States. IZA Discussion Paper No. 7150, Available at SSRN: https://ssrn.com/abstract=2207291

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David Dorn

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Gordon H. Hanson

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