Trading with China: Productivity Gains, Job Losses
IMF Working Papers, May 23, 2017
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Bibliographic details
- Authors: JaeBin Ahn, Romain A Duval
- Published: May 23, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475595833.001
Summary
- Study period: mid-1990s to late-2000s.
- Sample: country-sector-level data for 18 advanced economies.
- Main finding: large productivity gains from trading with China accompanied by adverse employment effects in exposed industries.
- Interpretation: results point to large gains from free trade and underscore the scope for a more active policy role in redistributing gains and easing workers’ transitions between jobs and industries.
Methodology
- Identification strategy: instrument imports from (exports to) China in a given country-sector with the average imports from (exports to) China in the same sector in other advanced economies (approach similar to Autor, Dorn, and Hanson (2013)).
- Empirical focus: separately identify export and import channels; exploit exogenous variation in trade with China across country-sectors.
Quantitative Results and Key Statistics
- Median country-sector productivity effect: the (exogenous) rise of China in global trade may have increased the level of total factor productivity by about 1.9 percent.
- Contribution to overall TFP increase: the 1.9 percent increase equals 12.3 percent of the overall increase over the sample period.
- Sample size: 18 advanced economies.
- Paper length: 13 pages.
- Publication identifiers: Working Paper No. 2017/122; Issue: 122; Volume: 2017; DOI: https://doi.org/10.5089/9781475595833.001; ISBN: 9781475595833; ISSN: 1018-5941; Stock No: WPIEA2017122.
Employment Effects
- Using a similar empirical strategy, the authors find adverse employment effects of Chinese imports in exposed country-industries, consistent with previous studies.
- Net result: productivity gains coexisting with job losses in certain industries.
Policy Implications and Recommendations
- Recognize large aggregate gains from free trade driven by trade with China.
- Address distributional consequences through more active policy interventions, including:
- Easing workers’ transition between jobs and industries (retraining, mobility support).
- Redistributive measures to share gains across affected workers and communities.
Source: Trading with China: Productivity Gains, Job Losses, IMF Working Papers 2017, 122 (2017).
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- Trading with China: Productivity Gains, Job Losses, WP/17/122, May 2017