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 diffe...

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

The nature of international trade is changing. For centuries, trade mostly entailed an exchange of goods . Now it increasingly involves bits of value being added in many different locations, or what might be called trade in tasks . Revolutionary advances in transportation and communications technology have weakened the link between labor specialization and geographic concentration, making it increasingly viable to separate tasks in time and space. When instructions can be delivered instantaneously, components and unfinished goods can be moved quickly and cheaply, and the output of many tasks can be conveyed electronically, firms can take advantage of factor cost disparities in different countries without sacrificing the gains from specialization. The result has been a boom in “offshoring” of both manufacturing tasks and other business functions. 1 In this paper, we develop a simple and tractable model of offshoring based on the trade able tasks. We conceptualize production in terms of the many tasks that must be performed by each factor of production. A firm can perform each of the continuum of tasks required for the realization of its product either in close proximity to its headquarters or at an offshore location. Offshoring may be attractive, if some factors can be hired more cheaply abroad than at home, but it also is costly, because remote performance of a task limits the opportunities for monitoring and coordinating workers. 2 To capture this aspect of reality, our model features heterogeneous offshoring costs for the various tasks. In each industry, firms choose the geographic organization

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Trading Tasks: A Simple Theory of Offshoring

This paper documents the pervasiveness of job polarization in 16 Western European countries over the period 1993-2010. It then develops and estimates a framework to explain job polarization using routine-biased technological change and offshoring. This model can explain much of both total job polarization and the split into within- industry and between-industry components.

/pdf/explaining-job-polarization-routine-biased-technological-c6ixfut0wx.pdf

Explaining job polarization: Routine-biased technological change and offshoring

One of the world s leading economists of inequality, Branko Milanovic presents a bold new account of the dynamics that drive inequality on a global scale. Drawing on vast data sets and cutting-edge research, he explains the benign and malign forces that make inequality rise and fall within and among nations. He also reveals who has been helped the most by globalization, who has been held back, and what policies might tilt the balance toward economic justice."Global Inequality" takes us back hundreds of years, and as far around the world as data allow, to show that inequality moves in cycles, fueled by war and disease, technological disruption, access to education, and redistribution. The recent surge of inequality in the West has been driven by the revolution in technology, just as the Industrial Revolution drove inequality 150 years ago. But even as inequality has soared "within" nations, it has fallen dramatically "among" nations, as middle-class incomes in China and India have drawn closer to the stagnating incomes of the middle classes in the developed world. A more open migration policy would reduce global inequality even further.Both American and Chinese inequality seems well entrenched and self-reproducing, though it is difficult to predict if current trends will be derailed by emerging plutocracy, populism, or war. For those who want to understand how we got where we are, where we may be heading, and what policies might help reverse that course, Milanovic s compelling explanation is the ideal place to start."

/pdf/global-inequality-a-new-approach-for-the-age-of-3ke9hwfnj7.pdf

Global Inequality: A New Approach for the Age of Globalization

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 ...

https://www.nber.org/system/files/working_papers/w21906/w21906.pdf

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

The authors link industry-level data on trade and offshoring with individual-level worker data from the Current Population Surveys. They find that occupational exposure to globalization is associated with larger wage effects than industry exposure. This effect has been overlooked because it operates between rather than within sectors of the economy. The authors also find that globalization is associated with a reallocation of workers across sectors and occupations. They estimate wage losses of 2 to 4 percent among workers leaving manufacturing and 4 to 11 percent among workers who also switch occupations. These effects are most pronounced for workers who perform routine tasks.

Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys

The authors link industry-level data on trade and offshoring with individual-level worker data from the Current Population Surveys They find that occupational exposure to globalization is associated with larger wage effects than industry exposure This effect has been overlooked because it operates between rather than within sectors of the economy The authors also find that globalization is associated with a reallocation of workers across sectors and occupations They estimate wage losses of 2 to 4 percent among workers leaving manufacturing and 4 to 11 percent among workers who also switch occupations These effects are most pronounced for workers who perform routine tasks

/pdf/estimating-the-impact-of-trade-and-offshoring-on-american-3y61tszu7j.pdf

Estimating the Impact of Trade and Offshoring on American Workers using the Current Population Surveys

In this paper, we link industry-level data on offshoring activities of U.S. multinational firms, import penetration, and export shares with individual level worker data from the Current Population Surveys. We examine whether increasing globalization through offshoring or trade has led to reallocation of labor, both within and out of manufacturing, and measure its impact on the wages of domestic workers. We also control for the "routineness" of individual occupations. Our results suggest that (1) offshoring to high wage countries is positively correlated with U.S. manufacturing employment (2) offshoring to low wage countries is associated with U.S. employment declines (3) wages for workers who remain in manufacturing are generally positively affected by offshoring; in particular, we find that wages are positively associated with an increase in U.S. multinational employment in high income locations (4) much of the negative effects of globalization operate through downward pressure on wages of workers who leave manufacturing to take jobs in agriculture or services and (5) the downward pressure on aggregate U.S. wages operating through import competition has been quite important for some occupations. This effect has been overlooked because it operates across, not within, industries.

Estimating the impact of trade and offshoring on American workers using the current population surveys

Why are American Workers Getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS

Helping low-income families in rural areas find gainful employment and achieve economic self-sufficiency is an ongoing policy concern The Rural Welfare-to-Work Strategies demonstration is using rigorous experimental designs to build knowledge about how to help low-income families in rural areas strive toward sustained employment and self-sufficiency This report examines an employment-focused case management initiative deployed in southern Illinois Despite a lack of impacts on employment, earnings, and self-sufficiency, the findings imply a need for stronger interventions in rural areas and demonstrate the challenges inherent in designing, implementing, and evaluating programs in these types of settings

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Shannon Phillips

Papers

Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys

Estimating the Impact of Trade and Offshoring on American Workers using the Current Population Surveys

Estimating the impact of trade and offshoring on American workers using the current population surveys

Why are American Workers Getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS

Paths to Work in Rural Places: Key Findings and Lessons from the Impact Evaluation of the Future Steps Rural Welfare-to-Work Program. Final Report.