How Import Competition Affects Displaced Workers in the U.S.

Abstract

Abstract I use the Displaced Worker Survey and bilateral trade data to assess the impact of import competition from low-wage countries on displaced workers' unemployment duration and re-employment wages. While low-wage imports have almost no effect on unemployment duration for workers displaced from an industry with the average length of the quality ladder, I find that a ten percentage point increase in low-wage imports leads to a 5.6 week longer jobless spell duration for workers displaced from an industry with a short quality ladder. Similarly, a ten percentage point increase in low-wage imports leads to a 7.2 percent decline in re-employment wages for workers displaced from an average ladder industry, but it leads to an 11.3 percent decline in re-employment wages for workers displaced from a short ladder industry. I show evidence that greater low-wage imports raise the likelihood of sectoral relocation upon re-employment, leading to loss of sector specific human capital.