Effect of Increasing Import Competition from China on the Local Labor Market: Evidence from Sweden

Zhuhua Jiang,Jose Arreola Hernandez,Chizheng Miao,Seong-Min Yoon

doi:10.3390/su14052631

Zhuhua Jiang, Jose Arreola Hernandez + Show 2 more

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https://doi.org/10.3390/su14052631

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Abstract

Import competition from low-wage countries can worsen labor market conditions in high-income countries and undermine the sustainability of free international trade. We examine the effect of increasing manufacturing imports from China on manufacturing employment and wage earnings distribution in Sweden by employing a two-stage least squares estimation method. The empirical results indicate that, except for the transportation sector, the effect of increasing import exposure to China on manufacturing and non-manufacturing employment growth is statistically insignificant. Regarding earnings distribution, we find that the earnings growth of low-wage workers in the manufacturing sector is not significantly influenced by an increase in Chinese imports. However, wage earners at the median level or above are positively impacted by trade shocks from China. These findings have implications for seeking policy alternatives that can enhance the sustainability of the international trade order.

Highlights

Academic Editor: Luigi AldieriInternational trade frictions between countries intensify, tariff barriers rise, and retaliatory tariffs are frequently imposed
These recent trends threaten the sustainability of the international trade order
We control for different local labor market characteristics

Summary

Introduction

Academic Editor: Luigi AldieriInternational trade frictions between countries intensify, tariff barriers rise, and retaliatory tariffs are frequently imposed. These recent trends threaten the sustainability of the international trade order. The rapid growth of trade between low- and high-income economies raises concerns about its impact on domestic labor markets in high-income countries [1,2,3,4,5,6,7,8,9,10,11,12,13,14]. The increase in China’s trade with other countries has dramatically changed world trade patterns over the past few decades, leading policymakers to rethink domestic labor market adjustments and their implications. China’s share of world exports has increased from less than 2% in 1998 to 14.7% in 2020, with China’s primary export being manufactured goods (UNCTAD, https://unctad.org/news/china-rise-trade-titan (accessed on 3 February 2022)). In the United States, for instance, numerous manufacturing jobs have been lost to increasing imports of manufactured goods from China [15]

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