Scholarly Comments on Academic Economics

Globalization and the China Shock: A Reassessment of Autor, Dorn, and Hanson

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Abstract

In a seminal article entitled “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” authors David Autor, David Dorn, and Gordon Hanson (ADH, 2013) estimated the effect of imports of manufactured goods from China from 1990 to 2007 on employment, wages, and social welfare payments in the USA. The authors concluded that imports from China reduced manufacturing employment and lowered wages of workers in non-manufacturing industries. In this article, I argue that the conceptual model used in ADH is misspecified because it focused only on Chinese imports, which represent only a fraction of all imports and are correlated with imports from other countries. Accordingly, ADH’s empirical implementation is based on an instrumental variables approach focused only on Chinese imports. This leads to a violation of the exclusion restriction because the instrument for Chinese imports is correlated with imports from other countries. This leaves the interpretation of ADH’s estimates uncertain. ADH’s estimates clearly do not measure the effect of Chinese imports on employment and wages holding all other things equal, and, I argue, do not even measure the broader equilibrium effect of Chinese imports on outcomes that include changes in imports from other countries. The evidence I present suggests there are likely effects from omitted variables in the ADH estimate that render the estimates in ADH uninformative.

Data and code used in this research are available here.

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Volume (Issue)
Pages
27–45
Published
JEL classification
F14, F16, J23, J31
Keywords
trade exposure, employment, wages
Downloads
202 article downloads
169 complete issue downloads
Total: 371

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