Magnification of the ‘China Shock’ Through the U.S. Housing Market

Yuan Xu, Hong Ma and Robert Feenstra

No 26432, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The ‘China shock’ operated in part through the housing market, which is one reason why its impact was so large in the United States. We add housing to a multi-region monopolistic competition model, with individuals choosing whether and where to work. Controlling for housing reduces the negative coefficient of import exposure on manufacturing employment by 20-25%, with a significant indirect magnification through the housing market. Combining manufacturing and construction employment, the indirect effect of the China shock through the housing market explains one-fifth as much of the variance in employment as the direct effect of import exposure, with further employment impacts through independent fluctuations in the housing market.

JEL-codes: F14 R31 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-cna and nep-ure
Note: ITI
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Published as Yuan Xu & Hong Ma & Robert Feenstra, 2023. "Magnification of the ‘China shock’ through the U.S. housing market," Review of International Economics, vol 31(5), pages 1864-1893.

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