Import competition, regional divergence, and the rise of the skilled city

Javier Quintana González

No 2115, Working Papers from Banco de España

Abstract: This paper analyzes the contribution of import competition to the regional divergence among US metropolitan areas over recent decades. I document that the sharp rise in imports of Chinese manufacturing goods had a significant effect on the spatial skill polarization and the divergence of college wage premium among local labor markets. The effects of the China trade shock were systematically different depending on the skill intensity of local services. Among regions with skill-intensive services, a higher exposure to import competition in manufacturing increased the number and wages of college-educated workers. The negative effects of the China shock concentrated in exposed regions with a low density of college-educated workers. The heterogeneous effects of import competition explain one third of the spatial skill polarization and one fourth of the divergence in college wage premium. I show that the contribution of the trade shock operates through the reallocation of workers across sectors and regions. Using a novel measure of “labor market exposure to the China shock”, I document that service industries expand when local manufacturers face import competition. High human capital regions exposed to the China shock undergo a faster transition from manufacturing to skill-intensive service industries and attract college-educated workers from other locations.

Keywords: international trade; import competition; regional inequality; skill sorting; factor mobility (search for similar items in EconPapers)
JEL-codes: F14 F16 F66 I24 J24 J61 R12 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2021-04
New Economics Papers: this item is included in nep-geo, nep-int, nep-lab and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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