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Re-examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective

Author

Listed:
  • Zhi Wang
  • Shang-Jin Wei
  • Xinding Yu
  • Kunfu Zhu

Abstract

The United States imports intermediate inputs from China, helping downstream US firms to expand employment. Using a cross-regional reduced-form specification but differing from the existing literature, this paper (a) incorporates a supply chain perspective, (b) uses intermediate input imports rather than total imports in computing the downstream exposure, and (c) uses exporter-specific information to allocate imported inputs across US sectors. We find robust evidence that the total impact of trading with China is a positive boost to local employment and real wages. The most important factor is employment stimulation outside the manufacturing sector through the downstream channel. This overturns the received wisdom from the reduced-form literature and provides statistical support for a key mechanism hypothesized in general equilibrium spatial models.

Suggested Citation

  • Zhi Wang & Shang-Jin Wei & Xinding Yu & Kunfu Zhu, 2018. "Re-examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective," NBER Working Papers 24886, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24886
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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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