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The Impact of Chinese Import Penetration on Danish Firms and Workers

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  • Ashournia, Damoun

    () (University of Oxford)

  • Munch, Jakob R.

    () (University of Copenhagen)

  • Nguyen, Daniel

    () (University of Copenhagen)

Abstract

The impact of imports from low-wage countries on domestic labor market outcomes has been a hotly debated issue for decades. The recent surge in imports from China has reignited this debate. Since the 1980s several developed economies have experienced contemporaneous increases in the volume of imports and in the wage gap between high- and low-skilled workers. However, the literature has not been able to document a strong causal relationship between imports and the wage gap. Instead, past studies have attributed the widening wage gap to skill biased technological change. This paper finds evidence for the direct impact of low wage imports on the wage gap. Using detailed Danish panel data for firms and workers, it measures the effects of Chinese import penetration at the firm level on wages within job-spells and over the longer term taking transitions in the labor market into account. We find that greater exposure to Chinese imports corresponds to a negative firm-level demand shock, which is biased towards low-skill intensive products. Consistent with this, an increase in Chinese import penetration results in lower wages for low-skilled employees.

Suggested Citation

  • Ashournia, Damoun & Munch, Jakob R. & Nguyen, Daniel, 2014. "The Impact of Chinese Import Penetration on Danish Firms and Workers," IZA Discussion Papers 8166, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8166
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    Cited by:

    1. Dauth, Wolfgang & Findeisen, Sebastian & Südekum, Jens, 2016. "Adjusting to Globalization - Evidence from Worker-Establishment Matches in Germany," CEPR Discussion Papers 11045, C.E.P.R. Discussion Papers.
    2. Bahar Baziki, Selva & Ginja, Rita & Borota Milicevic, Teodora, 2015. "Trade Competition, Technology and Labor Re-allocation," Working Paper Series, Center for Labor Studies 2016:1, Uppsala University, Department of Economics.
    3. Stefano Schiavo & Lionel Nesta, 2017. "International Competition and Rent Sharing in French Manufacturing," DEM Working Papers 2017/07, Department of Economics and Management.
    4. Borrs, Linda & Knauth, Florian, 2016. "The impact of trade and technology on wage components," DICE Discussion Papers 241, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Nilsson Hakkala, Katariina & Huttunen, Kristiina, 2016. "Worker-level consequences of import shocks," Working Papers 74, VATT Institute for Economic Research.
    6. Larry D. Qiu & Chaoqun Zhan, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 45-71, February.
    7. Einiö, Elias, 2015. "The Loss of Production Work: Identification of Demand Shifts Based on Local Soviet Trade Shocks," Working Papers 61, VATT Institute for Economic Research.
    8. 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.
    9. Meinen, Philipp, 2016. "Markup responses to Chinese imports," Discussion Papers 02/2016, Deutsche Bundesbank.
    10. Sievertsen, Hans Henrik, 2016. "Local unemployment and the timing of post-secondary schooling," Economics of Education Review, Elsevier, vol. 50(C), pages 17-28.
    11. Yamashita, Nobuaki, 2017. "The People’s Republic of China’s Import Competition and Skill Demand in Japanese Manufacturing," ADBI Working Papers 644, Asian Development Bank Institute.
    12. Meinen, Philipp, 2016. "Markup responses to Chinese imports," Economics Letters, Elsevier, vol. 141(C), pages 122-124.
    13. Duc Anh Dang, 2017. "The effects of Chinese import penetration on firm innovation: Evidence from the Vietnamese manufacturing sector," WIDER Working Paper Series 077, World Institute for Development Economic Research (UNU-WIDER).
    14. Nilsson Hakkala, Katariina & Huttunen, Kristiina, 2016. "Worker-Level Consequences of Import Shocks," IZA Discussion Papers 10033, Institute for the Study of Labor (IZA).
    15. repec:bla:etrans:v:25:y:2017:i:1:p:91-109 is not listed on IDEAS
    16. Gampfer, Benjamin & Geishecker, Ingo, 2015. "Endogenous competition exposure: China's rise, intra-industry and intra-firm reallocations," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112996, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Chinese import penetration; wage inequality; firm heterogeneity;

    JEL classification:

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

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