Spatial Spillovers of Local Trade Shocks: Estimation and Distributional Consequences

We propose a novel spatial IV approach to estimate inter-regional employment spillovers from local trade shocks and apply it to the surge of Chinese import competition in the U.S. We find strong spillovers at the local level that substantially reshape the geography of the shock's employment burden. Our results further suggest that these indirect effects propagate through input-output linkages rather than labor mobility. Moreover, we show that our estimates rationalize the roughly 30 percent gap between Autor et al. (2013) and the structural follow-up literature in the aggregate U.S. manufacturing employment decline attributed to Chinese import competition.