BOX 2.1 Extensions of “The China Syndrome” With almost 3,000 citations since its publication in 2013 in the American Economic Review, “The China Syndrome: Local Labor Market Effects of Import Competition in the United States” by Autor, Dorn, and Hanson has exerted a seminal impact on analyzing the relationship between trade and employment. With this has come increased scrutiny of its findings, including its c onsideration of trade in intermediate inputs and the aggregate effects on welfare. Trade in intermediate inputs. The China shock increased not only the exports of final goods from China to industrial nations but also those of intermediate goods. Extending the ADH framework, several papers use a similar reduced-form specification but use intermediate input imports rather than total imports in computing the trade exposure. An influential study is Wang et al. (2018) argues that the negative employment effects found by ADH are offset if benefits from Chinese imports that serve as inputs into other downstream sectors are considered. The authors find job losses from two channels: (a) the direct competition channel (for example, US firms that directly compete with Chinese imports) and (b) the upstream channel (for example, US firms that sell their outputs to other firms affected by Chinese imports). But these negative impacts are more than offset by benefits accrued from downstream US firms that use Chinese imports as inputs. Once the authors account for all three channels of exposure to trading with China, they find a positive boost to local employment and real wages. Aggregate effects on welfare. The other key refinement of the ADH approach has been to extend this cross-regional reduced-form specification to capture aggregate economy-wide effects by incorporating information on interregional linkages. Accordingly, a recent body of literature has surfaced that not only studies the regional impacts of Chinese imports but also discusses the effects beyond the labor markets. It uses general equilibrium spatial models that allow for intermarket linkages, facilitating an analysis of how trade shocks affect aggregate welfare. Some of the key studies using these more comprehensive models find positive net economic effects of China’s growth (Adão, Arkolakis, and Esposito 2019; Caliendo, Dvorkin, and Parro 2019; Galle, Rodríguez-Clare, and Yi 2017).
the longer-term effects of exports on labor market outcomes (Artuç et al. 2019; McCaig and Pavcnik 2018). Although the channels of impacts are country-specific, some key messages can be drawn from the new body of literature that captures the impacts of trade at the local and subnational levels and by region of residence of workers. First, effects of trade on labor income and poverty are large, localized (geographically concentrated), and limited to certain sectors and occupations. These could be negative or positive, depending on the type of trade shock faced by a country. When
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