Labour market characteristics and surviving import shocks

Abstract

This paper investigates whether different labour market characteristics amplify or dampen the local labour market impacts from Chinese import competition exposure. I exploit state‐level variation in initial, pre‐shock labour market characteristics and regional variation across local labour markets in exposure to Chinese imports for identification. I find that local labour markets in states with higher union density experience more severe adverse consequences as a result of increased import exposure. Conversely, higher initial minimum wages help mute the negative impacts of the China shock. I also provide some evidence that exceptions to employment‐at‐will legislation can affect employment responses to increased Chinese imports. Finally, examining all policies together in an index, I show that higher levels of policies intended to benefit and protect workers can actually magnify the extent of the damage inflicted by import competition. My results suggest that initial labour market characteristics and policies can play an important role in understanding why local labour markets react differently to trade shocks.

Does globalisation alleviate polarisation?

“…For example, Autor et al (2020) illustrate that the regions in the United States exposed to significant Chinese import penetration experience more political polarisation, which is measured by public support for politically extremist candidates. More recent evidence given by Chan (2019) shows the Chinese import penetration increases the rate of unemployment, which can surge political polarisation. Colantone and Stanig (2018) also observe that the number of votes for "Leave" in the Brexit referendum was higher in cities, which are "hit harder" by the outcomes of globalisation.…”

The China Shock, Employment Protection, and European Jobs

“…In a related vein, Bernard, Jensen, and Schott (2006) showed that increased exposure to import competition from China leads to lower probability of plant survival and to a sharp decrease in plant employment and output growth in the United States. Chan (2017) found that the effects of Chinese imports differ across US states with distinct labor-market characteristics such as union density and minimum wages.…”

Minimum Wages, Import Status, and Firms' Innovation: Theory and Evidence From China

“…Later on, we will show that the economy features a steady state (instead of a balanced growth path) due to the obsolescence of products. 11 The steady-state value of an invention is:…”

“…A firm may own the patents for producing multiple varieties of domestic capital goods 11. See alsoGrossman and Lai (2004) 12.…”

“…55 Chan (2019) studies how Chinese import competition affects U.S. local labor market and finds that U.S. regions with higher minimum wages are less affected by import competition from China. …”