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We evaluate the duration of the China trade shock and its impact on a wide range of outcomes over the period 2000 to 2019. The shock plateaued in 2010, enabling analysis of its effects for nearly a decade past its culmination. Adverse impacts of import competition on manufacturing employment, overall employment-population ratios, and income per capita in more trade-exposed U.S. commuting zones are present out to 2019. Over the full study period, greater import competition implies a reduction in the manufacturing employment-population ratio of 1.54 percentage points, which is 55% of the observed change in the value, and the absorption of 86% of this net job loss via a corresponding decrease in the overall employment rate. Reductions in population headcounts, which indicate net out-migration, register only for foreign-born workers and the native-born 25-39 years old, implying that exit from work is a primary means of adjustment to trade-induced contractions in labor demand. More negatively affected regions see modest increases in the uptake of government transfers, but these transfers primarily take the form of Social Security and Medicare benefits. Adverse outcomes are more acute in regions that initially had fewer college-educated workers and were more industrially specialized. Impacts are qualitatively—but not quantitatively—similar to those caused by the decline of employment in coal production since the 1980s, indicating that the China trade shock holds lessons for other episodes of localized job loss. Import competition from China induced changes in income per capita across local labor markets that are much larger than the spatial heterogeneity of income effects predicted by standard quantitative trade models. Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes.

With China's 2001 WTO accession, trade costs between the US and China fell sharply, but the transport costs of Chinese imports within the US remained sizable. We argue that domestic transport costs shield local labor markets from globalization. Using a shift-share design for industry-level Chinese imports across 42 ports of entry, we show that US job losses from competing imports occurred near the ports where they arrived. Once accounting for domestic transport costs, import competition affects coastal areas more than inland areas; shows larger impacts in housing markets and indirectly affected jobs; and explains voting, mortality and family formation

The import competition literature suggests that Chinese industrial policies and technological trends have altered the nature of competition with China so that it does not take place on a level playing field anymore. Empirical evidence about firms' reactions in developed economies to competition with China is inconclusive, however. This paper studies how small, highly internationalised and specialised firms react to the growing penetration of Chinese exporters on their markets. We use a sample of Austrian manufacturing companies to explore the impact of increasing competition on changes in corporate strategy. We propose a novel indicator capturing import competition that highly internationalised companies face. We examine how firms adapt their search strategies related to technological capabilities and markets. While the exposure to Chinese competition has been on average relatively low, its impact on diversification choices has been significant. Companies exposed to growing Chinese competition are more likely to diversify their geographic markets, but less likely to diversify their product portfolio or broaden their competence base. These patterns are also reflected by changes in trade data.

A growing body of research has contributed to understanding the labour market and political effects of globalization. This article explores an overlooked feature of trade-induced adjustments in the labour market: the institutional aspect. We take advantage of the Italian collectively bargained minimum wage system, which is based on a two-tier structure, whereby the first tier entails setting minimum wages at the national contract level. Using an instrumental variable strategy and exploiting variations in contract-level exposure to trade, we find for the 1995–2003 period that, on average, the surge in imports decreased contractual minimum wages by 1.5%. This impact increases in the share of unskilled workers employed in the contract. This negative institutional effect contrasts with a non-significant effect of trade on total wages, with the latter becoming positive and large only for highly skilled workers.

Does higher import competition increase formalization and aggregate productivity? Exploiting plausibly exogenous variation from Chinese imports, we provide empirical causal evidence that higher imports increases the share of formal manufacturing enterprise employment in India. This formal share increase is both due to the rise in formal-enterprise employment driven by the high productivity firms, and a fall in informal-enterprise employment. The labor reallocation is enabled by the formal firms' hiring of contract workers, who do not carry stringent string costs. Overall, Chinese import competition increased formal sector employment share by 3.7 percentage points, and aggregate labor productivity by 2.87%, between 2000-2001 and 2005-2006.

This paper studies the impact of import competition from China on labor outcomes in the Peruvian manufacturing sector in 2001–2010. Using data from the Peruvian Household Survey, we use a two-step procedure to evaluate the impact of the surge in imports from China on the likelihood of having an informal job and on wages in both the formal and informal sectors. On the first step, the results suggest that greater import competition increased—albeit weakly—the likelihood of having an informal job for workers with elementary education. On the second step, we find that the surge in imports from China was detrimental to wages of the least educated individuals with informal jobs—with no education and elementary education—, although we also find that this result is mostly driven by the presence of self-employed among informal workers. We also observe a wage increase among workers with formal jobs and elementary and high school education. These results are robust to the inclusion of different exclusion restrictions and even after accounting for industry-level growth which was strong during the period studied.

Summary of Banco de España Working Paper no. 2115

Manufacturers in India are increasingly selling services—a phenomenon referred to as servitization. Both the proportion of manufacturers selling services and the share of services in total revenue of manufacturers increased threefold between 1994 and 2013. More productive manufacturers and those more exposed to import competition are more likely to sell services and to obtain a higher share of their revenue from services. A 10 percent increase in servitization is associated with 2.6 percent increase in manufacturing revenue. However, servitizing firms suffer a greater contraction in manufacturing revenue with increased import competition. This evidence suggests that servitization is not a successful defensive strategy to maintain manufacturing sales in the face of import competition, and it is more likely to be an exit strategy to flee import competition. Corroborative results indicate that past services sales are positively associated with the introduction of new services products and eventually a switch out of manufacturing and into services as the primary activity. Thus, servitization appears to be an aspect of “premature deindustrialization” in India, driven by the inability of manufacturers to cope with import competition, rather than structural transformation associated with a maturing manufacturing sector.

We study the effects of import competition on industry locations patterns in a small open economy with two regions. Domestic productivity growth converges to the international rate through firm-level investment in process innovation. With firms locating production and innovation in their lowest cost locations, the concentration of industry in the larger region is linked with firm-level innovation through an import competition effect that is increasing in the market share of imported goods and the productivity differential of domestic firms with the rest of the world. We show that increased import competition, through either a larger number of imported goods or a faster international rate of productivity growth, leads to greater industry concentration by reducing domestic market entry and decreasing the relative productivity of domestic firms. We also consider the implications of improved regional and international economic integration.

In this paper, we investigate how globalization is reflected in asset prices. We use shipping costs to measure firms' exposure to globalization. Firms in low shipping cost industries carry a 7% risk premium, suggesting that their cash flows covary negatively with investors' marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.

International audience; This paper analyzes how Egyptian manufacturing plants respond to changes in trade tariffs using firm-level data from the World Bank Enterprise Survey. Using Levinsohn and Petrin (Rev Econ Stud 70(2):317-341, 2003) methodology to calculate the total factor productivity for the Egyptian firms in the sample, the results stand in line with the heterogeneous-firm models of international trade predicting that fall in trade costs leads to a decrease in the market shares of domestic firms. The decrease of market share of the Egyptian manufacturing firms after trade reforms in 2004 reflects that the market became less concentrated after trade openness.

This paper quantifies how a small and open economy adapts and thereby shapes to what extent it is exposed to competition from China on the world market. Starting from granular firm-commodity-destination-level sales data for the universe of Danish manufacturing firms we construct counterfactual competition exposure, measured as sales weighted Chinese import shares in the home and all export markets while holding the industry composition, the product as well as the destination mix constant. Without adaptation the competition shock after China’s WTO accession would have been more than one and a half times of what has been readily observable. Besides broad industry-level structural change, intra-industry reallocations and intra-firm adjustments through product and destination switching are important adaptation channels. Furthermore, we find some evidence for dynamic quality differentiation as a relevant adaptation margin.

This paper studies the economic and political effects of a large trade shock in agriculture - the grain invasion from the Americas - in Prussia during the first globalisation (1871-1913). We show that this shock accelerated the structural change in the Prussian economy through migration of workers to booming cities. In contrast to studies using today's data, we do not observe declining per capita income and political polarisation in counties affected by foreign competition. Our results suggest that the negative and persistent effects of trade shocks we see today are not a universal feature of globalisation, but depend on labour mobility. For our analysis, we digitise data from Prussian industrial and agricultural censuses on the county level and combine it with national trade data at the product level. We exploit the cross-regional variation in cultivated crops within Prussia and instrument with Italian trade data to isolate exogenous variation.

This paper examines the link between trade-induced changes in local labor market opportunities and English language fluency rates among low-skilled immigrants in the United States. Many of the production-based manufacturing jobs lost in recent years due to Chinese import competition did not require strong English-speaking skills while many of the jobs in expanding industries, mostly in the service sector, did. Consistent with responses to these changing labor market opportunities, we find that a $1,000 increase in import exposure per worker in a local area led to an increase in the share of low-skilled immigrants speaking English very well in that area by about half a percentage point. As evidence that at least part of this is a result of actual improvements in English language speaking abilities, we show that low-skilled immigrants in trade-impacted areas became especially likely to be enrolled in school compared to similarly low-skilled natives. However, while we find little support for selective domestic migration in response to trade shocks, we present evidence suggesting that new immigrants arriving from abroad choose where to settle based either on their English fluency or their ability to learn English. Regardless of whether low-skilled immigrants respond to trade shocks via actual improvements in English fluency or migration choices, our results suggest that immigrants help to equilibrate labor markets, an implication we find evidence for in the data.

This paper investigates the effects of trade liberalisation induced labour demand shocks on informal employment in China. We employ a local labour market approach to construct a regional measure of exposure to import tariffs by exploiting initial differences in industrial composition across prefectural cities and then link it with the employment status of individuals. Using three waves of household survey data between 1995 and 2007, our results show that workers from regions that experienced a larger tariff cut were more likely to be employed informally. Further results based on firm-level data reveal a consistent pattern; tariff reductions increased the share of informal workers within firms. Such effects are more salient among smaller and less productive firms. Our findings suggest an important margin of labour market adjustment in response to trade shocks in developing countries, i.e. employment adjustment along the formal-informal dimension.

Criticism of economic globalization and technological progress has gained support in Italy in the last two decades. However, due to the differentiated exposure of local labor markets to this process, electoral outcomes have varied considerably across the country. By observing the local impact of three global economic phenomena (flows of migrants, foreign competition in international trade, and diffusion of robots) alongside with the patterns of local electoral outcomes potentially associated with discontent, this study analyzes the economic forces driving the evolution of general elections in 2001, 2008, and 2013 in Italy. The analysis reveals that all these global factors had an impact on political outcomes associated with discontent, albeit in different ways and changing over time. All three factors are associated with increases in votes for far‐right parties in the period 2001–2008, but only robotization continues to have such an impact in the following period, while immigration is associated with an increase in votes for the Five‐Star Movement at the expense of far‐right parties. The results and extensions exploiting recent advances in political geography, political economy, and spatial econometrics make it possible to draw some general and methodological conclusions. Global drivers interact with elements pertaining to the political supply that empirical researchers should not be oblivious about. Political spillovers across neighboring areas add to the direct impact of locally mediated economic factors. Finally, the adoption of shift–share instrumental variables to identify the impact of robotization may lack robustness.

While recent work has documented a nexus between international trade and firm innovation, the underlying mechanisms explaining _rms' innovation in response to import competition are thus far poorly understood. To identify such mechanisms and their economic relevance, we use longitudinal linked employer-employee data from Denmark (1995-2012) and conduct analyses at both the firm and worker levels. We first show that import competition triggers a significant increase in innovation. Approximately 40 percent of the innovation effect is attributable to the increase in the share of R&D workers; 14 percent of this increase in the share of R&D workers is due to within-firm worker switching to R&D jobs, while 80 percent is explained by between-firm worker reallocation. Furthermore, we show that having a larger degree of between-firm worker reallocation to R&D jobs relative to within-firm switching is associated with more innovation. The salience of between-firm reallocation is further confirmed by a worker-level analysis, and its importance to innovation is underscored when we extend our analysis to Portugal.

Before the recent rebound due to the US–China trade war, tariffs on international trade were being progressively reduced over the last decades and advanced countries increasingly relied on non-tariff measures (NTMs) to protect their industries from foreign competition. In this paper, we exploit a novel database on NTMs to test their role in shaping the labour market effects of exposure to Chinese import competition over the 2000–2015 period. We relate changes in manufacturing employment to the share of employed workers protected by NTMs across US local labour markets and we instrument NTMs using the industry share of employment in swing states during presidential elections. Our results indicate that NTMs mitigate the negative employment effect of exposure to Chinese imports and have a positive effect on manufacturing wages (especially for the unskilled).

We revisit the impact of rising imports from China on within firm labour productivity growth in the EU. The period analysed is 2003 through 2016 and thus covers the recent increase of technology-intensive imports from China. We find that higher fractions of Chinese imports in aggregate imports slow down labour productivity growth of domestic firms in Europe. The adverse effect becomes more pronounced at higher growth rates. Multinationals are able to partly compensate the negative effects of import competition and benefit from Chinese imports at higher productivity growth intensities. The effects are strongest for local firms and firms in low tech industries. No effects were found for firms in high-tech industries.

A rapidly growing literature has shown that market concentration among domestic firms has increased in the United States over the last three decades. Using confidential census data for the manufacturing sector, we show that typical measures of concentration, once adjusted for sales by foreign exporters, actually stayed constant between 1992 and 2012. We reconcile these findings by linking part of the increase in domestic concentration to import competition. Although concentration among U.S.-based firms rose, the growth of foreign firms, mostly at the bottom of the sales distribution, counteracted this increase. We find that higher import competition caused a decline in the market shares of the top twenty U.S. firms.

The file attached to this record is the author's final peer reviewed version. This paper investigates whether and how import competition affects firm innovation. Using China's WTO accession as a quasi-natural experiment, we find that import competition reduces firm innovation, which is consistent with the Schumpeterian effect. We also find heterogeneous treatment effects across firm productivity and patent types. These results are consistent with the preference and knowledge spillover effects, but not with the escape-competition and trapped-factor effects.

This paper assesses the relationship between import competition and firm‐level markups by examining the imports of intermediate and final goods. Using a rich firm‐level dataset of French food companies from 2001 to 2013, we find that, on average, increased final goods import competition (intermediate inputs) is negatively (positively) associated with firm‐level markups. These results are consistent with the trade models that predict the pro‐competitive effects of trade and the incomplete cost pass‐through to prices. Importantly, the reduction in markups due to the pro‐competitive effect of trade tends to be counterbalanced by the increase in markups induced by incomplete pass‐through. Our empirical analysis uncovers considerable heterogeneity in the effects of output and input import competition on markups. Our results particularly reveal that firm size and industry market structure (i.e. concentration) are key determinants of how firm‐level markups respond to import competition.

This study examines how the product mixes of Japanese manufacturing plants have been impacted by the rise of China imports over the period 1997-2014, and the extent that plants' local embeddedness mitigate this causal relationship. We find evidence that China import competition induced both product downsizing and product exit within Japanese manufacturing plants. Moreover, we find that those negative e ects differ across plants according to various plant characteristics including the spatial organization of their parent firm. Finally, we show that both product survival and product sales are positively impacted by external agglomeration economies, but these e ects are strong for standalone plants only, and almost non-existent for plants aliated to spatially compact multi-unit firms.

The increased range and quality of China's exports is a major ongoing development in the international economy with potentially far-reaching effects. In this paper, on top of the direct effects of increased imports from China studied in previous research, we also measure the indirect labour market effects stemming from increased export competition in third markets. Our findings, based on matched employer-employee data of Portugal covering the 1991-2008 period, indicate that workers' earnings and employment are significantly negatively affected by China's competition, but only through the indirect 'market-stealing' channel. In contrast to evidence for other countries, the direct effects of Chinese import competition are mostly non-significant. The results are robust to a number of checks and also highlight particular groups more affected by indirect competition, including women, older and less educated workers, and workers in domestic firms.

Has rising import competition contributed to the polarization of U.S. politics? Analyzing multiple measures of political expression and results of congressional and presidential elections spanning the period 2000 through 2016, we find strong though not definitive evidence of an ideological realignment in trade-exposed local labor markets that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising import competition by China, we find that trade exposed electoral districts simultaneously exhibit growing ideological polarization in some domains – meaning expanding support for both strong-left and strong-right views – and pure rightward shifts in others. Specifically, trade-impacted commuting zones or districts saw an increasing market share for the FOX News channel (a rightward shift), stronger ideological polarization in campaign contributions (a polarized shift), and a relative rise in the likelihood of electing a Republican to Congress (a rightward shift). Trade-exposed counties with an initial majority white population became more likely to elect a GOP conservative, while trade-exposed counties with an initial majority-minority population become more likely to elect a liberal Democrat, where in both sets of counties, these gains came at the expense of moderate Democrats (a polarized shift). In presidential elections, counties with greater trade exposure shifted towards the Republican candidate (a rightward shift). These results broadly support an emerging political economy literature that connects adverse economic shocks to sharp ideological realignments that cleave along racial and ethnic lines and induce discrete shifts in political preferences and economic policy.