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The Employment and Wage Effects of Import Competition in the United States

  • Gene M. Grossman

A new methodology is developed to determine the extent to which import competition has been responsible for labor displacements and wage movements inspecific, allegedly trade-impacted sectors. The procedure involves the estimation of reduced-form wage and employment equations by sector. These equations are first derived from a more complete structural model of general equilibrium resource allocation.The proposed methodology is applied to nine manufacturing sectors in the United States. The sensitivity of employment to the domestic price of imports varies significantly across these nine sectors, whereas industry wages are relatively unaffected by movements in the price of the foreign good.Counterfactual simulations are performed under the hypothetical assumption of no intensification or abatement of import competition from 1967-1979. The differences between the paths of unemployment and wages so generated and the actual, historical paths are attributed to the effects of import competition.Imports have been responsible for the loss of a large number of jobs in only one industry, and for a significant loss in wages in two industries, among the nine studied.

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File URL: http://www.nber.org/papers/w1041.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1041.

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Date of creation: Dec 1982
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Publication status: published as Grossman, Gene M. "The Employment and Wage Effects of Import Competition in the United States." Journal of International Economic Integration, Vol. 2, No. 1, (Spring 1987), pp. 1-23.
Handle: RePEc:nbr:nberwo:1041
Note: ITI IFM
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  1. Linda Gard & James Riedel, 1980. "Safeguard protection of industry in developed countries : Assessment of the implications for developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(3), pages 471-492, September.
  2. Eric Verreydt & Jean Waelbroeck, 1982. "European Community Protection against Manufactured Imports from Developing Countries: A Case Study in the Political Economy of Protection," NBER Chapters, in: Import Competition and Response, pages 369-400 National Bureau of Economic Research, Inc.
  3. Hill, John K. & Mendez, JoseA., 1983. "Factor mobility and the general equilibrium model of production," Journal of International Economics, Elsevier, vol. 15(1-2), pages 19-26, August.
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