The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade

David Autor, David Dorn and Gordon Hanson

No 9748, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: China's emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.

Keywords: labor market adjustment; trade; China (search for similar items in EconPapers)
JEL-codes: F16 H55 J23 J31 J63 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2016-02
New Economics Papers: this item is included in nep-cna, nep-lma and nep-tra
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Citations: View citations in EconPapers (554)

Forthcoming - published in: Annual Review of Economics, 2016, 8, 205-240

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Related works:
Journal Article: The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade (2016)
Working Paper: The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade (2016)
Working Paper: The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade (2016)
Working Paper: The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade (2016)
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