The authors analyze the effect of rising Chinese import competition between 1990 and 2007 on U.S. local labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization and accounting for U.S. imports using changes in Chinese imports by other high-income countries. They find that rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import-competing manufacturing industries. Their main analysis indicates that import competition explains one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.
Growing Regional Disparities
The China Syndrome: Local Labor Market Effects of Import Competition in the United States
American Economic Review