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Trade Shocks and the Shifting Landscape of U.S. Manufacturing

Author

Listed:
  • Katherine Eriksson
  • Katheryn Russ
  • Jay C. Shambaugh
  • Minfei Xu
Abstract
Using data over more than a century, we show that shifts in the location of manufacturing industries are a domestic reflection of what the international trade literature refers to as the product cycle in a cross-country context, with industries spawning in high-wage areas with larger pools of educated workers and moving to lower-wage areas with less education as they age or become “standardized.” We exploit the China shock industries as a set of industries that were in the late-stage product cycle by 1990 and show how the activity in those industries shifted from high-innovation areas to low-education areas over the 20th century. The analysis also suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on local education levels, and on local manufacturing wages. The risk of unemployment and detachment from the labor force rises most when a shock hits in areas where an industry already has begun phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate.

Suggested Citation

  • Katherine Eriksson & Katheryn Russ & Jay C. Shambaugh & Minfei Xu, 2019. "Trade Shocks and the Shifting Landscape of U.S. Manufacturing," NBER Working Papers 25646, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25646
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    Cited by:

    1. David Autor & David Dorn & Gordon Hanson, 2021. "On the Persistence of the China Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 52(2 (Fall)), pages 381-476.
    2. Nicholas Crafts & Alexander Klein, 2019. "The Rise and Fall of US Manufacturing: Re-Examination of Long-Run Spatial Trends," Studies in Economics 1910, School of Economics, University of Kent.
    3. Dorn, David & Levell, Peter, 2021. "Trade and Inequality in Europe and the US," CEPR Discussion Papers 16780, C.E.P.R. Discussion Papers.
    4. Jiang, Zhe (Jasmine), 2023. "‘Multinational Firms’ Sourcing Decisions and Wage Inequality: A Dynamic Analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    5. Stephen J. Redding, 2020. "Trade and Geography," NBER Working Papers 27821, National Bureau of Economic Research, Inc.
    6. Katheryn N. Russ & Jay C. Shambaugh & Sanjay R. Singh, 2024. "Currency Areas, Labor Markets, and Regional Cyclical Sensitivity," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(1), pages 152-195, March.
    7. Stefano Federico & Fadi Hassan & Veronica Rappoport, 2019. "Trade shocks and credit reallocation," CEP Discussion Papers dp1649, Centre for Economic Performance, LSE.
    8. Klein, Alexander, 2023. "From the Manufacturing Belt to the Rust Belt. Spatial Inequalities in the United States: An Interdisciplinary Literature Review," CAGE Online Working Paper Series 657, Competitive Advantage in the Global Economy (CAGE).
    9. Michael Coelli & James Maccarrone & Jeff Borland, 2023. "The dragon Down Under: the regional labour market impact of growth in Chinese imports to Australia," Regional Studies, Taylor & Francis Journals, vol. 57(11), pages 2148-2163, November.
    10. Jan‐Luca Hennig, 2023. "Can labour market institutions mitigate the China syndrome? Evidence from regional labour markets in Europe," The World Economy, Wiley Blackwell, vol. 46(1), pages 55-84, January.
    11. Ligang Song & Vishesh Agarwal, 2023. "The Future of Multilateralism in the Post‐pandemic World," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(1), pages 62-87, January.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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