The China Shock and Portuguese Manufacturing

In a widely cited series of papers, David Autor, Gordon Hanson, David Dorn, and their coauthors have documented the surprisingly strong effect of increased competition from Chinese exports on U.S. employment, political polarization, and even R&D spending and innovation (Autor et al., 2013; Autor et al., 2016a, b). China's exports to Western Europe have also grown sharply in recent decades. A number of papers have sought to follow Autor et al. (2013) in exploring the impact of these exports on European labor markets. The chief finding of this paper is that the nature of the impact of the China shock in Portugal and the mechanism through which it operates are quite different than that highlighted by Autor et al. (2013). We strongly suspect our findings for Portugal reflect economic realities common to other Southern European countries.