1. Peter K. Schott Yale School of Management & NBER
The Impact of U.S. Trade Liberalization with China on U.S. Manufacturing Workers and Firms
Peter K. Schott Yale School of Management & NBER

2. Outline
Old Results
New Results

3. Census Data LBD CM LFTTD Longitudinal Business Databse
Employment of all U.S. establishments
Annual data but limited information
Concordance issue
Census of Manufactures
Employment + other attributes for all manufacturing establishments, 1992(5)2007
Lots of information but low frequency
Transaction-level US import data
Value
U.S. importer and foreign exporter ID’s

4. Simple View of the Data – Trade Public Census Trade Data
Imports from China in the more-exposed products jump after PNTR
Most Exposed
Least Exposed

5. Simple View of the Data – Trade Public Census Trade Data
Imports from China in the more-exposed products jump after PNTR
This trend is not present in imports from rest-of-world (ROW)
China
ROW

6. Simple View of the Data – Employment Public NBER-CES Data
Before PNTR: high- and low-gap industries follow roughly parallel trends

7. Simple View of the Data – Employment Public NBER-CES Data
Before PNTR: high- and low-gap industries follow roughly parallel trends
Post PNTR: employment falls more sharply among high-gap industries
Least Exposed
Most Exposed

8. Empirical Strategy i=industry; t=year
DID specification
Regress industry-year employment from on interaction of NTR Gap and indicator for post-PNTR period (year>2000)
Add covariates that account for
Industry characteristics
Other policy changes (MFA, China’s entry into WTO, etc.)
Time-Varying
E.g., MFA, NTR rate, etc.
Time-Invariant
Initial K/L, Changes in Chinese import tariffs, etc.
Industry and year FE.

9. Alternate Explanations
Must match timing and pattern across industries
Possibilities:
Changes in Chinese policy
Lower import tariffs
Elimination of export licensing requirements
Elimination of production subsides
Reduced barriers to foreign investment
Union Resistance in the US
Popped US tech bubble
Rising Chinese competitiveness
End of Textile and Clothing Quotas

10. Additional Plant-Level Results (LBD)

11. Input-Output Linkages
Use input-output tables to compute
Upstream exposure via supplier industries
Downstream exposure via customer industries
Findings
Higher downstream exposure associated with employment loss and plant exit
Indirect evidence of trade-induced supply-chain disruptions (Baldwin and Venables 2013)

12. Additional Plant-Level Results (LBD)
Compare plant employment and plant death regressions
Reaction to PNTR included both shrinking and dying
Input-output linkages
Use input-output tables to compute plants’ exposure to PNTR the inputs they purchase (upstream NTR gap) and the industries they sell to (downstream NTR gap)
Employment among continuing plants and plant survival respond negatively to exposure to PNTR in downstream
Indirect evidence of trade-induced supply-chain disruptions (Baldwin and Venables 2013)

13. Motivation for Further Analysis: Overall U.S. JC and JD

14. Motivation: Manufacturing U.S. JC and JD

15. Margins of Adjustment Job creation margins
Plant expansion (PE) within continuing firms
Plant birth (PB) within continuing firms
Firm birth (FB)
Job destruction
Plant contraction (PC) within continuing firms
Plant death (PD) within continuing firms
Firm death (FD)
Examine change in employment along each margin

16. Raw Data: Gross Margins of Adjustment

17. Raw Data: Gross Margins of Adjustment

18. Raw Data: Net Margins of Adjustment

19. Implied Impact of PNTR from DID Regressions
Contribution of relatively strong job destruction
Helps explain jobless recovery trends in manufacturing noted by Faberman (2012)
Contribution of relatively weak job creation
Contribution of weak JC rises over time, preventing a “normal” recovery
Notes: Job destruction (JD) margins are plant contraction (PC) at continuing firms, plant death (PD) at continuing firms, and firm death (FD). Job creation (JC) margins margins are plant expansion (PE) at continuing firms, plant birth (PB) at continuing firms, and firm birth (FB).

20. Ever-vs Never-Manufacturing Firms
1977
2012
Manufacturing Employment
1987
1997
2007
Non-Manufacturing Employment
1977
2012
1987
1997
2007
Non-Manufacturing Employment
1977
2012
1987
1997
2007

21. Ongoing Research: Mechanisms

22. Ongoing Research: Mechanisms

23. Ongoing Research: Mechanisms
Estimated Impact of Interquartile Shift in Industry Exposure to PNTR
Notes: Figures display the 95% confidence intervals associated with an interquartile shif in industry exposure to PNTR. Source: authors calculations based on data from the NBER-CES Manufacturing Productivity database.