Autor, Dorn, and Hanson, on what we know about China

by on January 27, 2016 at 4:29 am in Data Source, Economics, Uncategorized | Permalink

They have a new and excellent summary paper (pdf), and that is Gordon not Robin Hanson:

China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and lab or economists.

This is some of the most important work done by economists in the last twenty years.

1 prior_test January 27, 2016 at 6:04 am

Come now, since this is some of the most important work done in 20 years, why not be gracious enough to write – ‘“Gordon Hanson, along David Autor and David Dorn, are some of our most important economists. This is their work.”’

After all, pretty much everything at this web site can also be seen in the light of being an endless succession of blurbs. Why not use one that can be so easily fit into so many different situations, without need to spare any thought.

2 dan1111 January 27, 2016 at 6:22 am

“pretty much everything at this web site can also be seen in the light of being an endless succession of blurbs.”

Gasp! You have exposed Marginal Revolution as…a blog!

3 MOFO January 27, 2016 at 10:40 am

I have a counter proposal, why dont you start your own blog and do all the things you think TC should be doing?

4 Govco January 27, 2016 at 2:18 pm

He self-identifies as German, which means he doesn’t take advice. But relentlessly provides it; if possible violently and otherwise with self-assured hectoring.

5 rayward January 27, 2016 at 6:37 am

Shifting a large segment of income from one sector to another is one thing, shifting it to the other side of the globe is something altogether different. What were affected employees to do, move to China? Moreover, as the shift to China was occurring, so was the continued shift to the 1%. I know, absent unemployment benefits the affected employees would have had the incentive to learn new skills and would be employed by now. Indeed, I would suggest that absent tenure, maybe some economists would have learned something from the Great Recession. Instead, many are still fighting windmills and other imaginary enemies. http://www.nytimes.com/2016/01/27/opinion/subprime-reasoning-on-housing.html?ref=opinion&_r=0 But give credit where credit is due: Beckworth does believe the Great Recession was caused by a demand imbalance, an imbalance in demand for money (too much demand for money). Ecumenism or blasphemy?

6 Floccina January 27, 2016 at 12:54 pm

So USA workers incomes have not risen as much as would have liked, and some people in old manufacturing cities like Detroit, Buffalo NY have done poorly which is sad. I wish that consumption, wealth and income inequality were less. Still free trade is a huge benefit and Chinese people count too.

7 Lord Action January 27, 2016 at 2:17 pm

“Still free trade is a huge benefit and Chinese people count too.”

They shouldn’t count for much if you’re an American treaty negotiator.

I’m perfectly willing to accept that free trade agreements generate surplus. But I’m more than a bit worried that we’ve given the bulk of it away to emerging markets, and that smarter negotiation would have captured more of it for American citizens.

8 Adrian Ratnapala January 27, 2016 at 11:08 pm

I doubt it though. The the rise of east Asian economies is part of a great refversion-to-the mean where the lead the West had built since the is being pulled back. In the face of the, western countries choosing protection rather than free trade would merely have been marginalised behind their wall.

I get it that you are not calling for outright protectionism, but I am not sure what needle you are trying to thread instread.

9 Susara January 28, 2016 at 10:45 pm

This is rather rich. The West has been pushing the third world for free trade agreemeents for the last century – to great detriment of the development of their local economies. The argument has always been that this is for their better good in the long term. The argument has also been that it’s just ‘fair’; if you can’t compete in a sector your government shouldn’t be protecting you or bailing you out. The wonders of capitalism and free markets, no? Haven’t the third world been given that bitter medicine for decades? And now that they *can* compete suddenly you shouldn’t be ‘giving the bulk awa to emerging markets?’

You are not giving anything away. Developed economies already huge structural advantages that keep economic growth within their borders. Now you won’t even allow developing countries to leverage their weak currencies, poor environmental protection and willingness to work for peanuts.

Yes, Chinese people count too.

10 David Walker February 16, 2016 at 12:30 am

Many of this blog’s readers are not American treaty negotiators. Many – including me – are not even Americans.

That said, it would be interesting to find out from Tyler how he sees policies which raise well-being in the rest of the world at the cost of some lessening of well-being in the US.

11 Ray Lopez January 27, 2016 at 9:36 am

I think this paper is capturing nothing more than the fact most people don’t like to move to a new job. Most people–like in the medieval ages–don’t move far from where they’re born. During the Middle Ages this was one day’s walk (20 miles = 32 km). Today it might be one day’s drive. Rare is the pioneer like me who’s lived in a half dozen countries for more than one year, and several US states.

12 msgkings January 27, 2016 at 11:58 am

‘Pioneer’: is that your word for parole dodger?

13 Ed January 27, 2016 at 3:50 pm

Historically, quite a few pioneers/ emigrants WERE parole dodgers, or equivalent.

14 Lord January 27, 2016 at 9:49 am

So exporting greenbacks isn’t that profitable after all. Hoocoodanode?

15 Jamie_NYC January 27, 2016 at 12:56 pm

“At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize.”

And yet, as your next post says, all leading presidential candidates in this cycle reject TPP. It’s as if they are competing for popular votes, or something…

16 Dots January 27, 2016 at 2:46 pm

I am googling to find answers to some questions about which taxes r cheapest/easiest to collect, and about why 50 mpg sedans r so cheap in India – r they light/unsafe, functionally unreliable? r they unsafe/unreliable by contemporary standards, 1990 standards? please help me, better googlers

welfare gains in Asia from trade with the W seem too hi to regret, but the various threads of literature about human capital intertia within and across generations has humbled my neoliberalism

17 spencer January 27, 2016 at 3:51 pm

Is this why we have Trump as a possible US president?

People have gotten tired of US politicians ignoring the “cost” of trade, largely to the blue collar population and they are now turning to the individual who seems to be expressing their problem.

18 Mike W January 27, 2016 at 6:39 pm

“Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.”

What have the “trade and labor economists” been doing since 1980?

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