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

Outline Old Results New Results

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

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

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

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

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

Empirical Strategy i=industry; t=year DID specification Regress industry-year employment from 1990-2007 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.

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

Additional Plant-Level Results (LBD)

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)

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)

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

Motivation: Manufacturing U.S. JC and JD

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

Raw Data: Gross Margins of Adjustment

Raw Data: Gross Margins of Adjustment

Raw Data: Net Margins of Adjustment

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).

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

Ongoing Research: Mechanisms

Ongoing Research: Mechanisms

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.