Lately I’ve been studying a stream of papers by Autor, Dorn, and Hanson (ADH) on the impact of Chinese trade on local US labor markets. They do careful empirical work and document a number of facts:
- “Annual US imports from China increased by 304 billion dollars between 1991 and 2007”. (ADH. 2016)
- “Imports from China grew by 235 billion dollars across the eight other high-income countries” (ADH 2016)
- That the change in trade between US and China as well as other developed countries and China was similar suggests that “China’s falling prices, rising quality, and diminishing trade and tariff costs in these surging sectors are a root cause” (ADH 2016)
- Tracing individual workers over time, Autor et al. (2014) confirm that there is little geographic migration in response to the trade shock.
- Acemoglu and ADH (2016) estimate that had China’s import share in the US not growth after 1999, there would have been 560,000 less manufacturing job losses from 2000-2011.
- Accounting for linkages between industries raises this number to 985,000 manufacturing jobs and 2,000,000 total jobs.
They’ve made a compelling case that exposed workers suffered real losses in response to the Chinese trade shock. As China’s comparative advantage is in manufacturing, most of this work has been restricted to looking at the manufacturing sector in the US. I worry that this might overstate the total impact of these trade shocks on the US as a whole. Also, manufacturing in the US has been declining for at last the last 50 years. It isn’t certain that the decline in manufacturing isn’t something endogenous to the US and other developed countries.
ADH directly address the second issue (decline within US manufacturing), but the concern got me thinking about just how large the manufacturing sector is in the US.
I grabbed some data from FRED (from) and created the following plot:
Some qualitative statements about the picture above:
- The trend in the manufacturing share of total US labor (slope of the blue line) looks very similar before and after China enters the WTO in December 2011
- In the last decade, the manufacturing share of US employment is less than 10%
- Total unemployment in the US rises in 2001 and 2008 – dates that coincide with recessions in the US. From just this picture it is unclear if the recession or the Chinese trade shock drives those spikes.
Here’s the (Julia) code I used to construct the plot.
using FredData, PlotlyJS, DataFrames
f = Fred();
# get the data
kwargs = Dict(
:observation_start => "1970-01-01",
:observation_end => string(Dates.today()),
)
# hours
man_employment = get_data(f, "MANEMP"; kwargs...).df
all_employment = get_data(f, "PAYEMS"; kwargs...).df
man_date = man_employment[:date]
get_value(a_df) = a_df[a_df[:date] .== man_date, :value]
my_data = DataFrame(date=man_date,)
my_data[:MAN] = (man_employment[:value] ./ get_value(all_employment)) .* 100
# US unemployment
unemp = get_data(f, "UNRATE"; kwargs...).df
my_data[:UNRATE] = get_value(unemp)
# entered on December 11 2001
china_WTO_date = Date(2001, 12, 11)
l1 = Layout(yaxis_ticksuffix="%", title="Manufacturing share")
l2 = Layout(yaxis_ticksuffix="%", title="US unemployment")
p1 = plot(my_data, x=:date, y=:MAN, name="Manufacturing share of labor", l1)
p2 = plot(my_data, x=:date, y=:UNRATE, name="US unemployment", l2)
p = [p1; p2]
anns = p.plot.layout[:annotations]
new_anns = vcat(anns, [attr(x=china_WTO_date, y=20.0, text="China", ax=-40, ay=0)])
relayout!(p,
showlegend=false,
shapes=vline([china_WTO_date], line_color="red", opacity=0.4),
annotations=new_anns,
)
# add recession bands
add_recession_bands!(p)
References
Acemoglu, D., Autor, D., Dorn, D., Hanson, G. H., & Price, B. (2015). Import Competition and the Great US Employment Sag of the 2000s. Journal of Labor Economics, 34(S1), S141–S198. http://doi.org/10.1086/682384
Autor, D. H., Dorn, D., & Hanson, G. H. (2013). The China Syndrome: Local Labor Market Effects of Import Competition in the United States. American Economic Review, 103(6), 2121–2168. http://doi.org/10.1257/aer.103.6.2121
Autor, D. H., Dorn, D., Hanson, G. H., & Song, J. (2014). Trade Adjustment: Worker-Level Evidence. The Quarterly Journal of Economics, 129(4), 1799–1860. http://doi.org/10.1093/qje/qju026
Autor, D. H., Dorn, D., & Hanson, G. H. (2016). The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade. Annual Review of Economics, 8(1), 205–240. http://doi.org/10.1146/annurev-economics-080315-015041