Winners and losers from a commodities-for-manufactures trade boom

Abstract

A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for Brazil, we find that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages and in-migration rates between 2000 and 2010, and greater rises in local wage inequality. However, in locations benefiting from rising Chinese demand, we observe higher wage growth, lower takeup of cash transfers and positive effects on job quality.

US exports and employment

“…Admittedly, this IV will also reflect demand conditions in those eight countries, but provided that those demand conditions are not correlated with those in the US, that should not present a problem for the IV. 8 In our paper, the IV should also be uncorrelated with US shocks. Since we are modeling exports, we aim to identify their impact on US employment from foreign demand shocks: those shocks would lead to a rise in exports and employment that is not contaminated by other shocks in the US market.…”

“…Since we are modeling exports, we aim to identify their impact on US employment from foreign demand shocks: those shocks would lead to a rise in exports and employment that is not contaminated by other shocks in the US market. Our first instrumental variable for export exposure uses the export expansion 8 Specifically, an unobserved common demand shock raises demand for the US domestic products, and therefore promotes employment, and will likely understate the impact of import shock. We present evidence in section 3 that foreign demand shocks are correlated with US import demand only through a common macroeconomic shock (equal across sectors), which is controlled for in our specification; see note 13.…”

“…This could be due to income growth of emerging economies since the 1980s, when many countries experienced fast growth and move from low income to middle-income countries, notably China and India. Income growth from emerging economies drives demand for high-quality consumption goods from high-income countries (Costa, Garred and Pessoa, 2016). Furthermore, emerging economies (China and other newly industrialized economies) are increasingly involved in global supply chains due to the disintegration of the production process (Feenstra, 1998).…”

Skill premium, labor supply, and changes in the structure of wages in Latin America

“…Adao (2015) focuses on shocks due to commodity prices and finds that they can account for only 5 to 10 percent of the fall of earnings inequality in Brazil. Also for Brazil, Costa et al (2016) examine the local labor market effects of import penetration of manufacturing goods and increasing demand for commodities from China and find that, if anything, the overall impact on inequality was mildly positive. Similarly, Halliday et al (2015) show that the fall of earnings inequality in Mexico that started in 1995 is inconsistent with traditional trade models.…”

Impact of US market access on local labour markets in Vietnam

“…Fukase (2014) finds provinces more exposed to the BTA experienced a relatively larger wage growth for unskilled workers. Costa, Garred and Pessoa (2016), in the case of Brazil, show that rising commodity demand in China is associated with wage growth in exposed Brazilian regions and an increase of workers in formal sector jobs. Brambilla, Lederman, and Porto (2013) use an Argentinian manufacturing firm dataset to examine the effect of export destinations on skills.…”