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

2016/08/08 by David Autor, David Dorn, Gordon Hanson · 3 citations
Economics, Econometrics and Finance · #China #Churning #Competition (biology) #Economic Growth and Productivity #Economics #Fiscal Policy and Economic Growth #Free trade #Global trade and economics #International economics #Labour economics #Macroeconomics #Real wages #Shock (circulatory) #Trade barrier #Unemployment #Wage

paper · pdf · doi:10.1146/annurev-economics-080315-015041

openalex publication_date 2016/08/08 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/06

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 the US 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, is a key item on the research agenda for trade and labor economists.

Citations

• Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity
• Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing
• The China Syndrome: Local Labor Market Effects of Import Competition in the United States
• Trade Adjustment: Worker-Level Evidence*
• Technology, Geography, and Trade
• Import Competition and the Great US Employment Sag of the 2000s
• Imported Intermediate Inputs and Domestic Product Growth: Evidence from India
• The Long and Short of the Canada-U.S. Free Trade Agreement
• The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China
• Made in China, sold in Norway: Local labor market effects of an import shock
• Demand Shifts, Population Adjustments, and Labor Market Outcomes during the 1980s
• Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras
• The Network Origins of Aggregate Fluctuations
• Regional Evolutions
• From Divergence to Convergence: Reevaluating the History Behind China's Economic Boom

Cited by

• Some Causal Effects of an Industrial Policy
• The growth of U.S. manufactured imports and the dubious feasibility of current U.S. trade policy
• China–United States relations [wikipedia]

Related

• Trade Adjustment: Worker-Level Evidence*
• The China Syndrome: Local Labor Market Effects of Import Competition in the United States
• Trading Places: Mobility Responses of Native- and Foreign-Born Adults to the China Trade Shock
• Re-examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective
• Household responses to trade shocks