The Surprisingly Swift Decline of US Manufacturing Employment

This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US impor...

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Bibliographic Details
Published in:The American economic review 2016-07, Vol.106 (7), p.1632-1662
Main Authors: Pierce, Justin R., Schott, Peter K.
Format: Article
Language:English
Subjects:
Costs
Employment
Exports
International trade
Manufacturing
Most favored nation clause
Normal trade relations
Tariffs
Trade policy
Union membership
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Summary:This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US importers and foreign-owned Chinese exporters. At the plant level, shifts toward less labor-intensive production and exposure to the policy via input-output linkages also contribute to the decline in employment. Results are robust to other potential explanations of employment loss, and there is no similar reaction in the European Union, where policy did not change.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.20131578