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The Impact of Chinese Trade on U.S. Employment: The Good, The Bad, and The Apocryphal

Author

Listed:
  • Nicholas Bloom

    (Stanford University)

  • Andre Kurmann

    (Drexel University)

  • Kyle Handley

    (University of Michigan)

  • Philip Luck

    (University of Colorado Denver)

Abstract

Using establishment-level micro data from the U.S. Census Bureau, this paper studies the impact of Chinese import penetration on firm reorganization and relocation across local labor markets. We find three main results. First, the negative effect of Chinese import penetration on local manufacturing employment documented in the existing literature is driven primarily by large, importing firms that simultaneously expand employment in non-manufacturing. A third of this negative manufacturing effect is accounted for by establishments switching their reported industry affiliation to non-manufacturing. Second, the reorganization of firm activity occurs mainly away from production of machinery, electronics, and transportation equipment towards wholesale, professional services (including R&D), and management. Together, the results are indicative of a “Silicone Valley” story of offshoring according to which firms focus U.S. activities on research, design, and distribution but produce the actual goods abroad. Third, the reorganization of firm activity occurs unevenly across local labor markets. The negative employment effects in manufacturing are concentrated in areas with below human capital (mainly the South and Mid-West) whereas most of the positive employment effects in non-manufacturing occur in areas with above average human capital (mainly the West and East coasts). This suggests one reason why the China shock polarizes politics.

Suggested Citation

  • Nicholas Bloom & Andre Kurmann & Kyle Handley & Philip Luck, 2019. "The Impact of Chinese Trade on U.S. Employment: The Good, The Bad, and The Apocryphal," 2019 Meeting Papers 1433, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:1433
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    References listed on IDEAS

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    Cited by:

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    2. Xavier Jaravel & Erick Sager, 2019. "What are the price effects of trade? Evidence from the US and implications for quantitative trade models," CEP Discussion Papers dp1642, Centre for Economic Performance, LSE.
    3. Autor, David & Dorn, David & Hanson, Gordon, 2021. "On the Persistence of the China Shock," CEPR Discussion Papers 16688, C.E.P.R. Discussion Papers.
    4. Grace Gu & Samreen Malik & Dario Pozzoli & Vera Rocha, 2022. "Chinese import competition, offshoring and servitization," Economic Inquiry, Western Economic Association International, vol. 60(2), pages 901-928, April.
    5. Jin, Zhangfeng & Pan, Shiyuan, 2020. "Incentive Pay and Firm Productivity: Evidence from China," GLO Discussion Paper Series 479, Global Labor Organization (GLO).
    6. Andrew B. Bernard & Teresa C. Fort & Valerie Smeets & Frederic Warzynski, 2020. "Heterogeneous Globalization: Offshoring and Reorganization," NBER Working Papers 26854, National Bureau of Economic Research, Inc.
    7. Boehm, Christoph E. & Flaaen, Aaron & Pandalai-Nayar, Nitya, 2020. "Multinationals, Offshoring, and the Decline of U.S. Manufacturing," Journal of International Economics, Elsevier, vol. 127(C).
    8. Xiang Ding & Teresa C. Fort & Stephen J. Redding & Peter K. Schott, 2019. "Structural Change Within Versus Across Firms: Evidence from the United States," Working Papers 2019-9, Princeton University. Economics Department..
    9. Kim, Gueyon, 2022. "Trade-Induced Adoption of New Work," IZA Discussion Papers 15165, Institute of Labor Economics (IZA).
    10. Barth, Erling & Finseraas, Henning & Kjelsrud, Anders & Moene, Karl Ove, 2020. "Hit by the Silk Road: How Wage Coordination in Europe Mitigates the China Shock," IZA Discussion Papers 13259, Institute of Labor Economics (IZA).
    11. Stefano Federico & Fadi Hassan & Veronica Rappoport, 2020. "Trade shocks and credit reallocation," Temi di discussione (Economic working papers) 1289, Bank of Italy, Economic Research and International Relations Area.
    12. Lee, Kiryoung & Jeon, Yoontae & Nam, Eun-Young, 2021. "Chinese Economic Policy Uncertainty and the Cross-Section of U.S. Asset Returns," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1063-1077.
    13. Anna Maria Mayda & Francesc Ortega & Giovanni Peri & Kevin Y. Shih & Chad Sparber, 2020. "Coping with H-1B Shortages: Firm Performance and Mitigation Strategies," NBER Working Papers 27730, National Bureau of Economic Research, Inc.
    14. Melissa Chow & Teresa C. Fort & Christopher Goetz & Nathan Goldschlag & James Lawrence & Elisabeth Ruth Perlman & Martha Stinson & T. Kirk White, 2021. "Redesigning the Longitudinal Business Database," Working Papers 21-08, Center for Economic Studies, U.S. Census Bureau.
    15. Goya, Daniel, 2021. "The network effect of Chinese competition on what domestic suppliers produce," Economic Modelling, Elsevier, vol. 102(C).
    16. Gueyon Kim, 2022. "Trade-Induced Adoption of New Work," Working Papers 2022-007, Human Capital and Economic Opportunity Working Group.
    17. Mansour, Hani & Medina, Pamela & Velasquez, Andrea, 2020. "Import Competition and Gender Differences in Labor Reallocation," IZA Discussion Papers 13608, Institute of Labor Economics (IZA).
    18. Boddin, Dominik & Kroeger, Thilo, 2021. "Structural change revisited: The rise of manufacturing jobs in the service sector," Discussion Papers 38/2021, Deutsche Bundesbank.
    19. Alexandr Kopytov & Nikolai Roussanov & Mathieu Taschereau-Dumouchel, 2020. "Cheap Thrills: the Price of Leisure and the Global Decline in Work Hours," NBER Working Papers 27744, National Bureau of Economic Research, Inc.
    20. Daniel R. Ringo, 2020. ""Revitalize or Stabilize": Does Community Development Financing Work?," Finance and Economics Discussion Series 2020-029, Board of Governors of the Federal Reserve System (U.S.).
    21. Jaravel, Xavier & Sager, Erick, 2019. "What are the price effects of trade? Evidence from the US for quantitative trade models," LSE Research Online Documents on Economics 103402, London School of Economics and Political Science, LSE Library.

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