ILO Research Department Seminar

Chinese imports and US labour market adjustments - insights from value-added trade flows

Presenter: Adam Jakubik World Trade Organization: Chair: Marva Corley RESEARCH

The authors exploit value-added decomposition of trade flows to distinguish the effects of domestic and foreign drivers of the “China shock” in the US. The effects found for the period 2000-08 are mostly driven by Chinese productivity growth. Those effects have greatly diminished after 2008 however. Whatever effects still persist are attributed to Chinese value added from industries where China has only recently gained comparative advantage. The fact that China has continued to develop and upgrade its skill intensity has likely contributed to the prolonged nature of the trade shock. As a methodological contribution, the authors improve on the local trade exposure measure by calculating it using value added industries. This takes into account the upstream effects felt by suppliers of a certain industry, whereas using exporting industries, implicitly assumes that labour content of exports comes solely from the exporting industry and thus fails to accurately allocate trade shock exposure across local labour markets.