Competing With the Dragon: Employment Effects of Chinese Trade Competition in 17 Sectors Across 18 OECD Countries

Stefan Thewissen,Olaf van Vliet

doi:10.1017/psrm.2017.35

Abstract

China’s rapid rise on the global economic stage has substantial and unequal employment effects in advanced industrialized democracies given China’s large volume of low-wage labor. Thus far, these effects have not been analyzed in the comparative political economy literature. Building on pooled time-series data, we analyze the effects of Chinese trade competition across 17 sectors in 18 countries. We devote attention to a new channel, increased competition from China in foreign export markets. Our empirical findings reveal overall employment declines in sectors more exposed to Chinese imports. Furthermore, our results suggest that employment effects are not equally shared across skill levels, as the share of hours worked worsens for low-skilled workers.

Highlights

Huber and Stephens (2014) do not find significant effects of total imports and exports as a percentage of GDP on earnings inequality
For Norway, Balsvik et al (2015) find negative employment effects, but no indications of wage effects. These authors attribute these dissimilarities in results to the lower flexibility of Norwegian labor market institutions compared to the United States. These case studies insightfully depict country-specific developments, they do not allow for a general assessment of labor market outcomes of Chinese trade competition across a broader group of OECD countries with diverse political–economic institutions
We look at the manufacturing industry, which consists of the sectors that are most exposed to Chinese trade competition

Summary

Introduction

Huber and Stephens (2014) do not find significant effects of total imports and exports as a percentage of GDP on earnings inequality. For Norway, Balsvik et al (2015) find negative employment effects, but no indications of wage effects These authors attribute these dissimilarities in results to the lower flexibility of Norwegian labor market institutions compared to the United States. For employment we have internationally comparable time series data on both trends in the relative amount of employment as well as the distribution of employment across skill groups at the sectoral level This approach allows us to examine the distributive effects of Chinese trade competition, while we can account for institutions found to be relevant in the comparative political economy literature (e.g., Rueda and Pontusson 2000; Mahler 2004). With respect to this literature, we seek to make three contributions

Objectives

Methods

Findings

Conclusion