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Value Added Exports and U.S. Local Labor Markets: Does China Really Matter?

Author

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  • Leilei Shen

    (Kansas State University)

  • Peri Silva

    (Kansas State University)

Abstract

Measuring the effects of international trade on labor market outcomes has never been more im-portant given the increasing interconnections among economies around the globe. However, using measures of exposure to trade flows based on gross exports may lead to a misleading picture given that production processes have essentially become globalized, allowing firms to have access to im-ported inputs as an example. We consider the effects of international trade by building a model with firm heterogeneity where firms have the ability to offshore the production of inputs. Our model highlights that international trade offers an opportunity for firms to become more productive by en-gaging in o ff-shoring activities while they face competition from imports of final goods in the do-mestic market. We then construct a measure of U.S. exposure to Chinese goods using value added trade to analyze its effects on U.S. local labor markets. Using value added trade, we find that con-tinuously rising exports from China to the U.S. do not have significant effects on employment and wages. We further decompose the measure of exposure into value added trade in intermediate and in final goods. In line with the theoretical framework, we find that an increase in value added ex-ports from China in final goods leads to a decrease in employment across U.S. local labor markets, while the effects from a change in the exposure to trade in intermediate goods are not significant.

Suggested Citation

  • Leilei Shen & Peri Silva, "undated". "Value Added Exports and U.S. Local Labor Markets: Does China Really Matter?," Development Working Papers 373, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:373
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    3. Akira Sasahara, 2022. "The Empirics of the China Trade Shock: A Summary of Estimation Methods and A Literature Review," Keio-IES Discussion Paper Series 2022-008, Institute for Economics Studies, Keio University.
    4. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2020. "Wage response to global production links: evidence for workers from 28 European countries (2005–2014)," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 769-801, November.
    5. Valentine Fays & Benoît Mahy & François Rycx, 2021. "Wage Differences According to Workers’ Origin: The Role of Working More Upstream in GVCs," LIDAM Discussion Papers IRES 2021022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 28 Aug 2021.
    6. Dagmara Nikulin & Joanna Wolszczak-Derlacz & Aleksandra Parteka, 2019. "Working Conditions In Global Value Chains.Evidence For European Employees," GUT FME Working Paper Series A 54, Faculty of Management and Economics, Gdansk University of Technology.
    7. Nicola Gagliardi & Benoît Mahy & François Rycx, 2021. "Upstreamness, Wages and Gender: Equal Benefits for All?," British Journal of Industrial Relations, London School of Economics, vol. 59(1), pages 52-83, March.
    8. Léa Marchal & Giulia Sabbadini, 2021. "Immigrant Workers, Firm Export Performance and Import Competition," Documents de travail du Centre d'Economie de la Sorbonne 21007, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    9. Robert C. Feenstra & Akira Sasahara, 2018. "The ‘China shock,’ exports and U.S. employment: A global input–output analysis," Review of International Economics, Wiley Blackwell, vol. 26(5), pages 1053-1083, November.
    10. McManus, T. Clay & Schaur, Georg, 2016. "The effects of import competition on worker health," Journal of International Economics, Elsevier, vol. 102(C), pages 160-172.
    11. Li, Yilin & Chen, Bin & Li, Chaohui & Li, Zhi & Chen, Guoqian, 2020. "Energy perspective of Sino-US trade imbalance in global supply chains," Energy Economics, Elsevier, vol. 92(C).
    12. Adam Jakubik & Victor Stolzenburg, 2021. "The ‘China Shock’ revisited: insights from value added trade flows [Import competition and the great US employment sag of the 2000s]," Journal of Economic Geography, Oxford University Press, vol. 21(1), pages 67-95.
    13. Nicola Gagliardi & Benoît Mahy & François Rycx, 2019. "Does firms’ position in global value chains matter for workers’ wages?. An overview with a gender perspective," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 55-62.
    14. Raymond Robertson & Timothy J. Halliday & Sindhu Vasireddy, 2020. "Labour market adjustment to third‐party competition: Evidence from Mexico," The World Economy, Wiley Blackwell, vol. 43(7), pages 1977-2006, July.
    15. Jiyoung Kim & Sun Go, 2022. "Exports to China and Local Employment in South Korea," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(2), pages 197-214, March.
    16. Nicola Gagliardi & Benoît Mahy & François Rycx, 2020. "Trade, GVCs, and wage inequality: Theoretical and empirical insights," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(2), pages 115-134.
    17. Sabina Szymczak & Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2022. "Position in global value chains and wages in Central and Eastern European countries," European Journal of Industrial Relations, , vol. 28(2), pages 211-230, June.
    18. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2019. "Global Value Chains and Wages: Multi-Country Evidence from Linked Worker-Industry Data," Open Economies Review, Springer, vol. 30(3), pages 505-539, July.
    19. Huber, Katrin & Winkler, Erwin, 2019. "All you need is love? Trade shocks, inequality, and risk sharing between partners," European Economic Review, Elsevier, vol. 111(C), pages 305-335.
    20. Aleksandra Parteka & Joanna Wolszczak-Derlacz & Dagmara Nikulin, 2021. "How digital technology affects working conditions in globally fragmented production chains: evidence from Europe," GUT FME Working Paper Series A 66, Faculty of Management and Economics, Gdansk University of Technology.
    21. Sasahara, Akira, 2019. "Explaining the employment effect of exports: Value-added content matters," Journal of the Japanese and International Economies, Elsevier, vol. 52(C), pages 1-21.
    22. HAYAKAWA Kazunobu & ITO Tadashi & URATA Shujiro, 2022. "Impacts of Increased Chinese Imports on Japan’s Labor Market: Firm and Regional Aspects," Discussion papers 22037, Research Institute of Economy, Trade and Industry (RIETI).
    23. Lake, James & Millimet, Daniel L., 2016. "Good Jobs, Bad Jobs: What's Trade Got To Do With It?," IZA Discussion Papers 9814, Institute of Labor Economics (IZA).

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    Keywords

    Value added exports; employment; wages;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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