Import Competition and the Great US Employment Sag of the 2000s

That is the new paper (pdf) by Acemoglu, Autor, Dorn, and Hanson, and here is the abstract:

Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable jump in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump. The U.S. employment “sag” of the 2000s is widely recognized but poorly understood. In this paper, we explore an under-appreciated force contributing to sluggish U.S. employment growth: the swift rise of import competition from China. We find that the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that through input-output linkages with the rest of the economy this negative trade shock has helped suppress overall U.S. job growth.

If you ask me what knowledge academic economics generated in the past year, one answer is a better sense of how much the rise of China has had an impact on labor markets in other countries.

Elsewhere in labor economics, the econ blogosphere very much underrates and indeed sometimes even scorns “matching theory.”  But this new paper by Larry Katz (pdf) suggests a calibrated matching model can explain almost all of the rise in observed long-term unemployment.  You will note that this is appended to other, more macro theories of unemployment to “fill in the boxes” and should not be considered a substitute for them.


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