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MMUNITY NEWS
Did "China Shock" Cause
Widespread Job Losses in the U.S.?
By the Stanford Center on China’s Economy and Institutions (SCCEI)
An exponential rise in Chinese imports to the positive effect on U.S. service sector jobs in areas
U.S. over the past 25 years is often credited with higher levels of human capital (i.e., greater
with widespread job losses, especially in U.S. share of the population with a college degree in
manufacturing. This belief motivates the rhetoric 1990 prior to the China shock, compared to the
around the U.S.-China trade war, often serving median). On the West Coast and New England, for
as fuel for anti-China discourse in the U.S. Yet, example, manufacturing job losses were limited,
a more fine-grained analysis of how the "China offset by gains in service employment.
shock" impacted employment, economic activity,
and firm behavior in the U.S. is difficult to find. China shock effect on manufacturing sector. In
This research attempts to rectify the gap. areas with lower human capital, on the other hand,
the China shock had a significant negative effect
The data. Using the U.S. Census Bureau's on U.S. manufacturing jobs. In much of the South
Longitudinal Business Database (LBD) as its and the Midwest, for instance, manufacturing
primary source, researchers examined the impact saw heavy job losses, primarily driven by business
of China's import shock on employment, firm downsizing and closures.
activities, and industry affiliation for more than
5 million firms and 7 million establishments in Significant reorganization of economic activity
the U.S. The LBD data was supplemented with tax and acceleration of regional inequality. Contrary
records and survey responses to the U.S. Economic to prevailing views, current analysis finds no
Census, which enabled researchers to track changes support for net negative effects on aggregate U.S.
in business operations within firms, sectors, and employment from the China shock. Instead, a
local labor markets between 1990 and 2014. geographic reallocation of economic activity took
place across the U.S., potentially accelerating
No evidence of net U.S.job losses resulting from regional inequality.
China shock. Increasing import competition
from China reallocated jobs and earnings from This research indicates that a structural shift
manufacturing in the U.S. heartland to the service created by the China shock produced winners
sector in coastal urban areas. Researchers do not and losers across the U.S. local labor markets
find evidence of net job loss, however, in the U.S. based on initial levels of human capital in the
as a whole between 1990 and 2014. One-third of region. Current analysis also suggests that unequal
manufacturing job losses were caused by existing geographic effects of firm adaptation may be
businesses that repurposed their operations from an important factor behind growing regional
manufacturing to services, particularly in research, inequality and political polarization in the U.S.
management, and wholesale.
Large multinational firms were the primary
drivers of manufacturing job losses, switching into
research, design, management, wholesale, and
other service sectors. Plants operating in the metal,
machinery, computers, and electronics sectors,
in particular, reallocated U.S. jobs away from
manufacturing to non-manufacturing sectors.
China shock effect on service sector. Increased
import competition from China had a significant
25 AMCHAM SOUTH CHINA
Did "China Shock" Cause
Widespread Job Losses in the U.S.?
By the Stanford Center on China’s Economy and Institutions (SCCEI)
An exponential rise in Chinese imports to the positive effect on U.S. service sector jobs in areas
U.S. over the past 25 years is often credited with higher levels of human capital (i.e., greater
with widespread job losses, especially in U.S. share of the population with a college degree in
manufacturing. This belief motivates the rhetoric 1990 prior to the China shock, compared to the
around the U.S.-China trade war, often serving median). On the West Coast and New England, for
as fuel for anti-China discourse in the U.S. Yet, example, manufacturing job losses were limited,
a more fine-grained analysis of how the "China offset by gains in service employment.
shock" impacted employment, economic activity,
and firm behavior in the U.S. is difficult to find. China shock effect on manufacturing sector. In
This research attempts to rectify the gap. areas with lower human capital, on the other hand,
the China shock had a significant negative effect
The data. Using the U.S. Census Bureau's on U.S. manufacturing jobs. In much of the South
Longitudinal Business Database (LBD) as its and the Midwest, for instance, manufacturing
primary source, researchers examined the impact saw heavy job losses, primarily driven by business
of China's import shock on employment, firm downsizing and closures.
activities, and industry affiliation for more than
5 million firms and 7 million establishments in Significant reorganization of economic activity
the U.S. The LBD data was supplemented with tax and acceleration of regional inequality. Contrary
records and survey responses to the U.S. Economic to prevailing views, current analysis finds no
Census, which enabled researchers to track changes support for net negative effects on aggregate U.S.
in business operations within firms, sectors, and employment from the China shock. Instead, a
local labor markets between 1990 and 2014. geographic reallocation of economic activity took
place across the U.S., potentially accelerating
No evidence of net U.S.job losses resulting from regional inequality.
China shock. Increasing import competition
from China reallocated jobs and earnings from This research indicates that a structural shift
manufacturing in the U.S. heartland to the service created by the China shock produced winners
sector in coastal urban areas. Researchers do not and losers across the U.S. local labor markets
find evidence of net job loss, however, in the U.S. based on initial levels of human capital in the
as a whole between 1990 and 2014. One-third of region. Current analysis also suggests that unequal
manufacturing job losses were caused by existing geographic effects of firm adaptation may be
businesses that repurposed their operations from an important factor behind growing regional
manufacturing to services, particularly in research, inequality and political polarization in the U.S.
management, and wholesale.
Large multinational firms were the primary
drivers of manufacturing job losses, switching into
research, design, management, wholesale, and
other service sectors. Plants operating in the metal,
machinery, computers, and electronics sectors,
in particular, reallocated U.S. jobs away from
manufacturing to non-manufacturing sectors.
China shock effect on service sector. Increased
import competition from China had a significant
25 AMCHAM SOUTH CHINA
