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A new methodology is developed to determine the extent to which import competition has been responsible for labor displacements and wage movements inspecific, allegedly trade-impacted sectors. The procedure involves the estimation of reduced-form wage and employment equations by sector. These equations are first derived from a more complete structural model of general equilibrium resource allocation.The proposed methodology is applied to nine manufacturing sectors in the United States. The sensitivity of employment to the domestic price of imports varies significantly across these nine sectors, whereas industry wages are relatively unaffected by movements in the price of the foreign good.Counterfactual simulations are performed under the hypothetical assumption of no intensification or abatement of import competition from 1967-1979. The differences between the paths of unemployment and wages so generated and the actual, historical paths are attributed to the effects of import competition.Imports have been responsible for the loss of a large number of jobs in only one industry, and for a significant loss in wages in two industries, among the nine studied.
This paper examines the impact of trade on employment, wages, and other outcomes across countries and explores the conditions and policies that help spread the gains from trade more evenly throughout the population. We exploit a large global firm-level dataset to examine the impact of import competition on employment, wages, and firm performance, as well as the firm, industry, and country factors that mitigate any negative impact of an import shock. In contrast to the results of some well-known single-country studies, we find limited adverse impact of import competition. In some countries and industries, import competition actually strengthens employment growth. In addition, import competition tends to improve average wages, investment, and firm profitability. Country characteristics, such as educational attainment, can also improve employment prospects in response to trade shocks. Finally, we find that firms experiencing greater import competition start with higher average wages; thus any relatively slower employment growth in this group of firms could lead to lower inequality.
These papers, by a number of leading international-trade theorists, present the first significant theoretical work to be done on a topic of considerable interest, import competition. Nine theoretical papers, on topics ranging from protectionist lobbying to adjustment costs, are synthesized in the editor's Introduction, which also contrasts these contributions with the traditional classroom analysis of import competition. Three major empirical studies close the volume. It will prove indispensable for anyone who wishes to think clearly about import competition and about how economies do—and should—respond to it.
Do job characteristics modulate the relationship between import competition and workers' wages? Using pooled cross-sectional, linked employee-establishment Census Bureau microdata and O*NET occupational characteristics, the paper models import competition and wages for more than 1.6 million individuals, grouped by job vulnerability defined by routineness, analytic complexity, and interpersonal interaction. Results show import competition is associated with wages that are: lower in routine and less complex jobs; higher in nonroutine and complex jobs; and higher for the highest and lowest levels of interpersonal interaction. This demonstrates the importance of accounting for occupational characteristics in understanding how trade and wages relate.
This paper aims to clarify two issues related to the potential costs of international trade: How does import competition affect the risk of job loss and unemployment for exposed workers, and how does it affect local communities? At the individual level, I find that the risk of layoff and unemployment to workers in trade-exposed sectors is comparable -- or even lower -- than the risk to workers in non-traded sectors and that these risks have not increased during the period of more intense competition from Chinese imports. At the community level, Autor, Dorn and Hanson (2013) find that local areas have experienced slower job and wage growth and higher unemployment because of import competition with China. Upon analyzing their data, I conclude that their results are biased by the weaker macroeconomic performance of 2000-2007 relative to the 1990s, which played out differently across local areas. I first show that their models omit significant interaction effects between control variables and time periods. When I analyze cross-area economic changes -- rather analyzing changes within and across areas -- I find that most of the significant negative effects identified in the original analysis no longer hold, including effects on overall employment, labor force participation, and wage growth. During each period, import competition actually predicts an increase in average wages for manufacturing workers, as well as non-manufacturing workers during the 1990s period, and import competition predicts a shift toward college educated non-manufacturing jobs in the second period. Over the entire period, I find that purely domestic shocks better explain local employment and wage growth patterns. I conclude that foreign competition does not appear to elevate the risk of job loss to a greater extent than domestic competition, and people living in the communities most exposed to foreign competition are no worse off on average.