Employment effects of Chinese imports in the US

In 2013, Autor, Dorn, and Hanson published a paper in the American Economic Review showing that rising import competition from China has been an important contributor to the recent decline in the employment rate of working age population in the United States.

Exploiting variation in exposure to Chinese import across local labor markets (commuting zones) over 1990-2007, they find that Chinese import exposure caused a large reduction in manufacturing employment: a $1,000 per worker increase in import exposure over a decade reduces manufacturing employment per working-age population by 0.6 percentage points (their Table 3, column 6), explaining about 44 percent of the actual decline in manufacturing employment from 1990 through 2007. Furthermore, the negative employment shock by Chinese imports goes beyond manufacturing and exists for nonmanufacturing workers. To be more specific, import exposure to Chinese imports caused a substantial employment decline in both manufacturing and nonmanufacturing sectors for workers without college education; while for workers with college education, import exposure caused substantial job loss in manufacturing sectors but a statistically insignificant increase in employment in nonmanufacturing sectors (their Table 5, Panel B) (Feenstra, Ma and Xu 2017: 2).

Robert Feenstra, Hong Ma and Yuan Xu have written a comment, "The China Syndrome: Local Labor Market Effects of Import Competition in the United States: Comment" (pdf), on that paper. In their comment Feenstra, Ma and Xu report results that cut the total employment effect in half, and in some groups the employment effect becomes insignificant, by controlling for the US housing boom .

The comment's abstract reads,

We re-examine the findings by Autor, Dorn, and Hanson (ADH, American Economic Review 2013, 103(6)) on the impact of Chinese import penetration on U.S. local employment by taking into account the concurrent housing boom. The responses of total employment, unemployment, or not-in-the-labor force to import exposure fall by about one-half when controlling for changes in housing prices, and become statistically insignificant in a number of cases. Results across sectors are more subtle. Noncollege workers in the manufacturing sector continue to experience a reduction in employment after correcting for the ‘masking’ effect of the housing boom, but that reduction does not occur in the nonmanufacturing sector. For college workers, their employment in the nonmanufacturing sector even rises due to the China shock, which fully offsets their reduced employment in manufacturing during 2000-2007. Our results imply that the net reduction in total US employment due to Chinese import exposure was about 0.8 million workers, or less than one-half of that implied by the estimates in ADH (2013).