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The rise of the East and the Far East: German labor markets and trade integration

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  • Wolfgang Dauth
  • Sebastian Findeisen
  • Jens Suedekum

Abstract

We analyze the effects of the unprecedented rise in trade between Germany and “the East” – China and Eastern Europe – in the period 1988 – 2008 on German local labor markets. Using detailed administrative data, we exploit the cross-regional variation in initial industry structures and use trade flows of other high-income countries as instruments for regional import and export exposure. We find that the rise of “the East” in the world economy caused substantial job losses in German regions specialized in import-competing industries, both in manufacturing and beyond. Regions specialized in export-oriented industries, however, experienced even stronger employment gains and lower unemployment. In the aggregate, we estimate that this trade integration has caused some 493,000 additional jobs in the economy and contributed to retaining the manufacturing sector in Germany. We also conduct our analysis at the individual worker level, and find that trade had a stabilizing overall effect on employment relationships.

Suggested Citation

  • Wolfgang Dauth & Sebastian Findeisen & Jens Suedekum, 2013. "The rise of the East and the Far East: German labor markets and trade integration," UBSCENTER - Working Papers 003, UBS International Center of Economics in Society - Department of Economics - University of Zurich.
  • Handle: RePEc:zur:uceswp:003
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    More about this item

    Keywords

    International trade; import competition; export opportunities; local labor markets; employment; China; Eastern Europe; Germany;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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