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The Employment and Wage Effects of Import Competition in the United States

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Author Info
Gene M. Grossman

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Abstract

A new methodology is developed to determine the extent to which import competition has been responsible for labor displacements and wage movements inspecific, allegedly trade-impacted sectors. The procedure involves the estimation of reduced-form wage and employment equations by sector. These equations are first derived from a more complete structural model of general equilibrium resource allocation.The proposed methodology is applied to nine manufacturing sectors in the United States. The sensitivity of employment to the domestic price of imports varies significantly across these nine sectors, whereas industry wages are relatively unaffected by movements in the price of the foreign good.Counterfactual simulations are performed under the hypothetical assumption of no intensification or abatement of import competition from 1967-1979. The differences between the paths of unemployment and wages so generated and the actual, historical paths are attributed to the effects of import competition.Imports have been responsible for the loss of a large number of jobs in only one industry, and for a significant loss in wages in two industries, among the nine studied.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1041.

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Date of creation: Sep 1988
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Handle: RePEc:nbr:nberwo:1041

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References listed on IDEAS
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  1. Linda Gard & James Riedel, 1980. "Safeguard protection of industry in developed countries : Assessment of the implications for developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(3), pages 471-492, September. [Downloadable!] (restricted)
  2. Eric Verreydt & Jean Waelbroeck, 1982. "European Community Protection against Manufactured Imports from Developing Countries: A Case Study in the Political Economy of Protection," NBER Chapters, in: Import Competition and Response, pages 369-400 National Bureau of Economic Research, Inc. [Downloadable!]
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  1. Oscarsson, Eva, 2000. "Trade, Employment and Wages in Sweden 1975-93," Research Papers in Economics 2000:8, Stockholm University, Department of Economics. [Downloadable!]
  2. Michael W. Klein & Scott Schuh & Robert K. Triest, 2000. "Job Creation, Job Destruction, and the Real Exchange Rate," NBER Working Papers 7466, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Riccardo Faini & Anna M. Falzoni & Marzio Galeotti & Rodolfo Helg & Alessandro Turrini, 2001. "Importing Jobs And Exporting Firms? On The Wage And Employment Implications Of Italy’S Trade And Foreign Direct Investment Flows," International Trade 0103002, EconWPA. [Downloadable!]
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  5. Gene M. Grossman, 1986. "Imports as a Cause of Injury: The Case of the U.S. Steel Industry," NBER Working Papers 1494, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. John M. Abowd & Thomas Lemieux, 1990. "The Effects of International Competiton on Collective Bargaining Outcomes: A Comparison of the United States and Canada," NBER Working Papers 3352, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Robert E. Baldwin, 1995. "The Effects of Trade and Foreign Direct Investment on Employment and Relative Wages," NBER Working Papers 5037, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Ann Harrison & Ana Revenga, 1995. "The Effects of Trade Policy Reform: What Do We Really Know?," NBER Working Papers 5225, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Joseph Zweimuller & Rudolf Winter-Ebmer, 1995. "Immigration, Trade and Austrian Unemployment," Institute for Research on Labor and Employment, Working Paper Series 1090, Institute of Industrial Relations, UC Berkeley. [Downloadable!]
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