Lasting Effects of an Import Shock: Channels of Adjustment

Polina Knutsson ()
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Polina Knutsson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden, https://polinaknutsson.com/

No 2020:3, Working Papers from Lund University, Department of Economics

Abstract: This paper exploits a quasi-natural experiment to study the channels of labor market adjustment to an import shock. Using matched employer-employee data from Sweden, I study workers' adjustment after the removal of quotas set out by the Multi-Fiber Arrangement for Chinese producers upon China's entry into the WTO. I find evidence of substantial losses in terms of earnings and employment. Sectoral mobility mitigates a portion of these losses, but gives rise to substantial adjustment frictions. The largest losses accrue to workers with skills specific to the exposed industry. Some losses are recovered through mobility across labor markets, but only workers in high-skill occupations benefit from this channel. I also show that skill specificity of the local labor market is an important determinant of adjustment and provide evidence of skill upgrading in response to the import shock.

Keywords: Import competition; worker mobility; human capital (search for similar items in EconPapers)
JEL-codes: F14 F16 J24 J31 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2020-03-24
New Economics Papers: this item is included in nep-int and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2020_003

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