The impact of Chinese import competition on Italian manufacturing

This paper documents the effects of increased import competition from China on the Italian labor market. In line with recent studies, we take two complementary approaches and study both the effects on local labor markets and on manufacturing workers. Our analysis shows that the Italian local labor markets which were more exposed to Chinese trade by means of their industry composition ended up suffering larger manufacturing and overall employment losses. Nevertheless, back‐of‐the‐envelope calculations suggest that the aggregate effect on total manufacturing employment is modest. At the individual level, contrary to what has been documented for many developed countries, workers initially employed in more exposed manufacturing industries did not suffer long‐term losses in terms of lower earnings or more discontinuous careers. While they were indeed less likely than other similar workers to continue working in manufacturing, they were also able to carry out successful transitions toward the non‐tradable sector, in other areas with better job opportunities.