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

David Autor, David Dorn and Gordon Hanson

No 21906, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F14 J23 J31 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-cna, nep-int and nep-ltv
Note: ITI LS
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Citations: View citations in EconPapers (541)

Published as David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade," Annual Review of Economics, vol 8(1).

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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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