The China Syndrome: Local Labor Market Effects of Import Competition in the United States
67 Pages Posted: 26 Jan 2013
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
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