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

David H. Autor; David Dorn; Gordon H. Hanson

doi:10.1146/annurev-economics-080315-015041

journal article Oct 31, 2016

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

David H. Autor David Dorn Gordon H. Hanson

Annual Review of Economics Vol. 8 No. 1 pp. 205-240 · Annual Reviews

View at Publisher Save 10.1146/annurev-economics-080315-015041

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.

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Details

Published: Oct 31, 2016
Vol/Issue: 8(1)
Pages: 205-240

Authors

D

David H. Autor

Department of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142;; The National Bureau of Economic Research, Cambridge, Massachusetts 02138

D

David Dorn

Department of Economics, University of Zurich, CH-8001 Zurich, Switzerland;; Centre for Economic and Policy Research, London EC1V 0DX, United Kingdom

G

Gordon H. Hanson

The National Bureau of Economic Research, Cambridge, Massachusetts 02138; School of Global Policy and Strategy, University of California, San Diego, La Jolla, California 92093;

Cite This Article

David H. Autor, David Dorn, Gordon H. Hanson (2016). The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade. Annual Review of Economics, 8(1), 205-240. https://doi.org/10.1146/annurev-economics-080315-015041

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

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