Abstract
This paper studies how the China shock affects unemployment rates and wage inequality across high-skilled and low-skilled workers in the United States, with particular emphasis on the dynamic and general equilibrium channels of firms' production locations and entry decisions. To shed light on the subject, I build a two-country trade-in-task model with firm heterogeneity, search-and-matching labor market frictions, and firms' endogenous selections into entry and offshoring. The model, consistent with evidence from vector autoregression analyses, uncovers important dynamics with implications for the impact of the China shock on U.S. worker inequality. Namely, it shows association between a decrease in offshoring costs and a short-lived increase in low-skilled unemployment in the source country, a longer-term decline in high-skilled unemployment, a transient expansion of the wage gap between high- and low-skilled workers, and an increase in firm entry.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.