Papers

Trade and Labor Markets: Lessons from China’s Rise
David Autor
IZA World of Labor, February 2018

The costs and benefits of free trade are among the most contentious topics in economic policy, no less today than two centuries ago when David Ricardo developed the theory of comparative advantage. While economists often argue in policy discussions—though not in textbooks—that trade is Pareto improving (i.e. at least one party wins without any other party losing), most laypeople view it as a constant-sum game, wherein exporters win and importers lose. In truth, both views are oversimplified. Trade grows the economic pie— that is, it is not constant-sum—but it typically shrinks the slices received by some citizens. Economic policy must grapple with how to maximize the shared gains while mitigating the concentrated costs that accompany trade integration.

 

When Work Disappears: Manufacturing Decline and the Falling Marriage-Market Value of Young Men
David Autor, David Dorn, and Gordon Hanson
Working Paper, January 2018

Abstract: We exploit the gender-specific components of large-scale labor demand shocks stemming from rising international manufacturing competition to test how shifts in the relative economic stature of young men versus young women affected marriage, fertility and children’s living circumstances during 1990-2014. On average, trade shocks differentially reduce employment and earnings, raise the prevalence of idleness, and elevate premature mortality among young males. Consistent with Becker’s model of household specialization, shocks to male relative stature reduce marriage and fertility. Consistent with sociological accounts, these shocks raise the share of mothers who are unwed and share of children living in below-poverty, single-headed households.


Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure
David Autor, David Dorn, Gordon Hanson and Kaveh Majlesi
Working Paper, December 2017

Abstract: Has rising import competition contributed to the polarization of U.S. politics? Analyzing outcomes from the 2002 and 2010 congressional elections and the 2000, 2008, and 2016 presidential elections, we detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by congressional voting records, we find strong evidence that congressional districts exposed to larger increases in import penetration disproportionately removed moderate representatives from office in the 2000s. Trade-exposed districts with an initial majority white population or initially in Republican hands became substantially more likely to elect a conservative Republican, while trade-exposed districts with an initial majority-minority population or initially in Democratic hands also become more likely to elect a liberal Democrat. In presidential elections, counties with greater trade exposure shifted towards the Republican candidate. We interpret these results as supporting a political economy literature that connects adverse economic conditions to support for nativist or extreme politicians.


Foreign Competition and Domestic Innovation: Evidence from U.S. Patents

David Autor, David Dorn, Gordon Hanson, Gary Pisano, and Pian Shu
Working Paper, December 2017

Abstract: The competitive shock to the U.S. manufacturing sector spurred by rising China import competition could either catalyze or stifle innovation. Using three distinct sources of variation to identify rising trade exposure, we provide a causal analysis of the effect of surging import competition on U.S. innovative activities. Applying a novel internet-based matching algorithm to map all U.S. utility patents granted by 2013 to firm-level data, and carefully accounting for the shifting concentration of patenting activity across sectors, we document a robust, negative impact of rising Chinese competition on firm-level and technology class-level patent production. Accompanying this fall in innovation, global employment, sales, profitability, and R&D expenditure all decline within trade-exposed firms. The trade-induced contraction along all margins of adjustment and for all measures of valuation suggest that the primary response of firms to greater import competition is to scale back their global operations.


Response to Robert Feenstra, Hong Ma, and Yuan Xu’s Comment on Autor, Dorn, and Hanson (AER 2013)
David Autor, David Dorn, and Gordon Hanson
April 2017

A 2017 comment by Feenstra, Ma, and Xu (FMX) claims that the estimation results on the impact of import competition on labor-market outcomes in Autor, Dorn and Hanson’s 2013 AER article (ADH) are biased by the exclusion of controls for contemporaneous changes in housing prices. In investigating these concerns, we find that (a) the trend component of local housing-price changes on which FMX primarily rely is highly likely to be endogenous to trade shocks, and (b) when one incorporates measures of plausibly exogenous changes in housing prices into the main ADH specifications, there is little change in ADH’s main empirical results. The key conclusions in FMX’s comment stem from either using endogenous house price changes—which are themselves affected by the China trade shock, as documented by extant literature—or by employing an instrumentation strategy that inadvertently uses the China trade shock as an instrument for house price changes and then incorrectly infers that house price changes (not the China shock) are the cause of adverse employment outcomes. We conclude that the main critique provided by the comment is not supported empirically.

 

Comment on Jonathan Rothwell’s Critique of Autor, Dorn, and Hanson (2013)
David Autor, David Dorn, and Gordon Hanson
March 2017

In a series of recent papers, Rothwell (2016a, 2016b, 2017) claims that the empirical results in Autor, Dorn, and Hanson (2013) on the impact of import competition with China on local labor markets in the United States are subject to specification bias, not robust to separating the sample into sub-periods, and subject to other weaknesses in analytical approach. In this note, we respond to the main thrust of Rothwell’s comments on ADH.

 


A Note on the Effect of Rising Trade Exposure on the 2016 Presidential Election

David Autor, David Dorn, Gordon Hanson, and Kaveh Majlesi
Appendix to “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure,” January 2017

This research note examines whether the exposure of local labor markets to increased import competition from China effected voting in the U.S. presidential election in 2016. It relates the change in the county-level Republican two-party vote share between 2000 and 2016 to the growth in local labor markets’ exposure to Chinese import penetration. We find a robust positive effect of rising import competition on Republican vote share gains. The magnitude of the Republican gains is non-trivial. A counterfactual study of closely contested states suggests that Michigan, Wisconsin, Pennsylvania and North Carolina would have elected the Democrat instead of the Republican candidate if, ceteris paribus, the growth in Chinese import penetration had been 50 percent lower than the actual growth during the period of analysis. The Democrat candidate would also have obtained a majority in the electoral college in this counterfactual scenario. These results add to previous research that documents negative impacts of import competition on employment and earnings in trade-exposed local labor markets (Autor, Dorn and Hanson, 2013; Acemoglu et al. 2016) and a decreased likelihood that moderate politicians win congressional elections in such locations (Autor, Dorn, Hanson and Majlesi, 2016).


The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade

David Autor, David Dorn, and Gordon Hanson
Annual Review of Economics Vol. 8 p. 205-240, October 2016

Abstract: China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.


Import Competition and the Great U.S. Employment Sag of the 2000s
Daron Acemoglu, David Autor, David Dorn, Gordon Hanson, and Brendan Price
Journal of Labor Economics, January 2016

Abstract: Even before the Great Recession, US employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable employment gains achieved during the 1990s, with a historic contraction in manufacturing employment being a prime contributor to the slump. We estimate that import competition from China, which surged after 2000, was a major force behind both recent reductions in US manufacturing employment and—through input-output linkages and other general equilibrium channels— weak overall US job growth. Our central estimates suggest job losses from rising Chinese import competition over 1999–2011 in the range of 2.0–2.4 million.

External link to data


Untangling Trade and Technology: Evidence from Local Labor Markets
David Autor, David Dorn, and Gordon Hanson
The Economic Journal, May 2015

Abstract: We juxtapose the effects of trade and technology on employment in US local labour markets between 1980 and 2007. Labour markets whose initial industry composition exposes them to rising Chinese import competition experience significant falls in employment, particularly in manufacturing and among non-college workers. Labour markets susceptible to computerisation due to specialisation in routine task-intensive activities instead experience occupational polarisation within manufacturing and non-manufacturing but do not experience a net employment decline. Trade impacts rise in the 2000s as imports accelerate, while the effect of technology appears to shift from automation of production activities in manufacturing towards computerisation of informationprocessing tasks in non-manufacturing.

External link to data

 

Trade Adjustment: Worker Level Evidence
David Autor, David Dorn, Gordon Hanson, and Jae Song
Quarterly Journal of Economics, September 2014

Abstract: We analyze the effect of exposure to international trade on earnings and employment of U.S. workers from 1992 through 2007 by exploiting industry shocks to import competition stemming from China’s spectacular rise as a manufacturing exporter paired with longitudinal data on individual earnings by employer spanning close to two decades. Individuals who in 1991 worked in manufacturing industries that experienced high subsequent import growth garner lower cumulative earnings, face elevated risk of obtaining public disability benefits, and spend less time working for their initial employers, less time in their initial two-digit manufacturing industries, and more time working elsewhere in manufacturing and outside of manufacturing. Earnings losses are larger for individuals with low initial wages, low initial tenure, and low attachment to the labor force. Low-wage workers churn primarily among manufacturing sectors, where they are repeatedly exposed to subsequent trade shocks. High-wage workers are better able to move across employers with minimal earnings losses and are more likely to move out of manufacturing conditional on separation. These findings reveal that import shocks impose substantial labor adjustment costs that are highly unevenly distributed across workers according to their skill levels and conditions of employment in the pre-shock period.


The China Syndrome: Local Labor Market Effects of Import Competition in the United States

David Autor, David Dorn, and Gordon Hanson
American Economic Review, October 2013

Abstract: We analyze the effect of rising Chinese import competition between 1990 and 2007 on US local labor markets, exploiting cross-market variation in import exposure stemming from initial differences in industry specialization and instrumenting for US imports using changes in Chinese imports by other high-income countries. Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import-competing manufacturing industries. In our main specification, import competition explains one-quarter of the contemporaneous aggregate decline in US manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.

External link to data


The Geography of Trade and Technology Shocks in the United States

David Autor, David Dorn, Gordon Hanson
American Economic Review Papers and Proceedings, May 2013

Abstract: This paper explores the geographic overlap of trade and technology shocks across local labor markets in the United States. Regional exposure to technological change, as measured by specialization in routine task-intensive production and clerical occupations, is largely uncorrelated with regional exposure to trade competition from China. While the impacts of technology are dispersed throughout the United States, the impacts of trade tend to be more geographically concentrated, owing in part to the spatial agglomeration of labor-intensive manufacturing. Our findings highlight the feasibility of separately identifying the impacts of recent changes in trade and technology on US regional economies.