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The China Syndrome: Local Labor Market Effects of Import Competition in the United States

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Listed author(s):
  • David H. Autor
  • David Dorn
  • Gordon H. Hanson

Abstract

We analyze the effect of rising Chinese import competition between 1990 and 2007 on US local labor markets, exploiting cross- market variation in import exposure stemming from initial differences in industry specialization and instrumenting for US 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 US manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 6 (October)
Pages: 2121-2168

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:6:p:2121-68
Note: DOI: 10.1257/aer.103.6.2121
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Find related papers by JEL classification:
  • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
  • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
  • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
  • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
  • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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