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Workers Beneath the Floodgates: Low-Wage Import Competition and Workers' Adjustment

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  • Hale Utar

Abstract

Using employee-employer matched data for the period 1999 to 2010, I analyze the impact of a low-wage trade shock on manufacturing workers in a high-wage country, Denmark, and how they adjust to the shock over a decade. To derive causal effects I exploit the dismantling of import quotas on Chinese products with China’s accession to the WTO as a quasi-experiment and utilize within-industry, within-occupation heterogeneity in workers’ exposure to this trade shock. Showing significant negative effect on workers’ earnings and employment trajectories over the decade, the study identifies job instability in the service sector as a main adjustment friction which is concentrated among workers with manufacturing specific education and occupation. The results establish the importance of specific human capital in trade adjustment and provide evidence of skill upgrading at the individual level as workers re-build lost human capital through education.

Suggested Citation

  • Hale Utar, 2016. "Workers Beneath the Floodgates: Low-Wage Import Competition and Workers' Adjustment," CESifo Working Paper Series 6224, CESifo.
  • Handle: RePEc:ces:ceswps:_6224
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    References listed on IDEAS

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    Cited by:

    1. Keller, Wolfgang & Olney, William W., 2021. "Globalization and executive compensation," Journal of International Economics, Elsevier, vol. 129(C).
    2. Katrin Huber & Erwin Winkler, 2016. "All We Need is Love? Trade-Adjustment, Inequality, and the Role of the Partner," SOEPpapers on Multidisciplinary Panel Data Research 873, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Keller, Wolfgang & Utar, Hale, 2016. "International Trade and Job Polarization: Evidence at the Worker-Level," CEPR Discussion Papers 11311, C.E.P.R. Discussion Papers.
    4. Aksoy, Cevat Giray & Guriev, Sergei & Treisman, Daniel, 2018. "Globalization, Government Popularity, and the Great Skill Divide," CEPR Discussion Papers 12897, C.E.P.R. Discussion Papers.
    5. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
    6. Cortes, Guido Matias & Salvatori, Andrea, 2019. "Delving into the demand side: Changes in workplace specialization and job polarization," Labour Economics, Elsevier, vol. 57(C), pages 164-176.
    7. Wolfgang Dauth & Sebastian Findeisen & Jens Suedekum, 2021. "Adjusting to Globalization in Germany," Journal of Labor Economics, University of Chicago Press, vol. 39(1), pages 263-302.
    8. Dai, Mi & Huang, Wei & Zhang, Yifan, 2018. "How Do Households Adjust to Trade Liberalization? Evidence from China's WTO Accession," IZA Discussion Papers 11428, Institute of Labor Economics (IZA).
    9. Mau, Karsten, 2017. "US policy spillover(?) – China’s accession to the WTO and rising exports to the EU," European Economic Review, Elsevier, vol. 98(C), pages 169-188.
    10. Alexandru MANOLE & Madalina-Gabriela ANGHEL & Ihab Jweida SJ JWEIDA & Radu STOICA & Emilia STANCIU, 2016. "Structural analysis of foreign trade of Romania," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(12), pages 21-31, December.
    11. Dix-Carneiro, Rafael & Soares, Rodrigo R. & Ulyssea, Gabriel, 2016. "Local Labor Market Conditions and Crime: Evidence from the Brazilian Trade Liberalization," IZA Discussion Papers 9638, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    workers' adjustment to trade shock; globalization; earnings trajectories; specific human capital; job mobility; unemployment; low-wage country competition; multi-fibre arrangement; China;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment

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