New results on the China shock, furthermore the China shock is largely over

Using Census micro data we find that the impact of Chinese import competition on US manufacturing had a striking regional variation. In high-human capital areas (for example, much of the West Coast or New England) most manufacturing job losses came from establishments industry switching to services. The establishment remained open but changed to research, design, management or wholesale. In the low human-capital areas (for example, much of the South and mid-West) manufacturing job-losses came from plant closure without much offsetting gain in service employment. Offshoring appears to drive these manufacturing job losses – the Chinese trade impact arose primarily in large importing firms that were simultaneously expanding service sector employment. Hence, our data suggest Chinese trade redistributed jobs from manufacturing in lower income areas to services in higher income areas. Finally, the impact of Chinese imports appear to have disappeared after 2007 – we find strong employment impacts from 2000 to 2007, but nothing since from 2008 to 2015.

That is from a new paper by Nicholas Bloom, Kyle Handley, André Kurmann, and Philip Luck.  Via Bryan Caplan.


The truth about Red China has been revealed:

Indeed,"to learn where the wild ducks fly
follow the white-hare banner....where bullets have nicked the mud and rust from it, and against the glare the tall, leaping shape of the sergeant-major."

It is not what he said.

This paper confirms what I assumed most already know: that American firms didn't "lose" to China, American firms "gained" from China by shifting production to lower cost China which also facilitated tax avoidance schemes. The narrative that China stole jobs was a myth perpetrated in part by politicians but more often by the American firms that gained from the transition. But things are different now, as we have entered a new phase for China development, from one where where China firms produced goods for American firms to one where China firms produce goods for China firms to compete with goods made by and for American firms. Not surprisingly, American firms are have changed their tune and are now complaining about unfair competition from China, after 20-30 years of profiting from China firms. What's a big business worshiper to do?

Firms are living organisms, recall the legal links you cited, so by "firms gained" surely you mean the corporate entity, not the people. What the USA should have done 30 years ago is have a Frederick List type industrial promotion policy, but that horse is out the barn door. Google Vaclav Smil, who wrote a number of books on this topic. When robots and/or illegal aliens cut people's hair, file their taxes, and perform surgery on you (I bet there's a market for illegal alien 'doctors', 'dentists' and 'lawyers', they are quite cheap and popular in the Philippines), what services will ordinary Americans do? Just live off their former glory in the way of an overinflated US dollar? Unpack this paragraph rayward...

Well, I guess US citizens could live immigrants- minimize costs to a bare minimum, work as many hours as possible and maximize earnings over a ten to 15 year period, and then move to a third world country. I mean, you would recommend that you move to the Philippines, right?

Bingo! P Burgos. Americans are not willing to make such sacrifices. Living overseas in PH you have to deal with such small problems as spitting cobras (up to 3 meters, we killed one that slithered up to us in broad daylight, they have no fear as they have no native enemies, mongooses being nonexistent in eastern PH, and they are semi-endangered outside our region but common inside), malaria (rare), dengue fever (common but I've never had it), other fevers and brain wasting amoebas and flesh-eating bacteria, tropical diseases like that one you get from algae by eating swordfish that mimics MS and can cripple you for decades, no cure, and, last but not least, my favorite since I caught it despite my best efforts and it's symptomless, Ascaris lumbricoides, the giant roundworm, one of mine was over 12 inches long when I shat it out, sometimes they come out of your mouth when you cough, very common, many people take anti-worm pills ever year or two since it's almost a given you will catch one. It's more of a conversation starter for me, I was not afraid, but my hot 20-something girl is afraid of them and snakes. Oh yeah, I forgot typhoons. I actually lived through almost the eye of the strongest typhoon ever recorded, Typhoon Haiyan (Yolanda). It was like the most powerful DC summer storm you've ever experienced for a few seconds, except it went on for hours (wind speeds 145-195 mph, surpassed by the Mexican Hurricane Patricia in 2015 with 215 mph winds). You can't find all the foods you want in PH except when they're in season either. But otherwise it's fun, I like it. And people without money work hard for about $5 a day. Backbreaking work hacking plants like sugarcane with a machete (bolo) or digging ditches with a shovel, building a house with primitive tools, cultivating rice, digging a well with just a shovel until the water is up to your neck, and you keep digging as deep as you can, that sort of thing. I don't think your average American on welfare would go for this sort of work. And sea snakes, I forgot them. In some unpolluted beaches (polluted ones tend to kill them) the beaches are infested with them, and the funny think is, though one bite will kill you in 20 minutes, and the nearest hospital is hours away, the locals and even the largely Korean tourists are completely unafraid of them (ignorance IMO). I had a few bump next to me, scared me. I learned not to make sudden movements. You could wear a wetsuit if you're afraid or take your chances, since only I think 20% of the time do the snakes envenom their bite, most of the time the bites are dry (no poison injected). Your life depends on the whims of a tiny lizard like creature, whether they feel like wasting the energy to envenom their bites. Surprised more tourist don't die from them, but last year only one Aussie or Brit was killed.

Economies are zero sum.

Costs+income=zero. Saving/debt can time shift both for individuals, but not the economy.

The liberal/blue regions are still driven by the logic of tax and spend. Public policy is all about increasing costs. Higher labor costs by higher wages, longer hours of work, more workers. The benefit of higher costs is higher incomes, and individuals are then by public policy driven to incur living costs as high as incomes, which are labor costs.

In conservative regions, the public policy is lower costs, always less workers, fewer hours, lower wages. This means lower income, lower consumption. The benefit of this lower cost public policy is the implementation of Trump's self deportation policy, residents migrate to California, or into liberal/blue high cost cities/urban areas in States like Texas. Even in California, people self deport from low cost California towns to high cost towns.

The thing about services is its hard to ship them 10 miles, much over a thousand miles.

Eg, how much lower in costs does a burger or hair cut need to be to get you to walk, bike, Uber, bus, an extra 10 miles from the one near you.

Thanks to investment in shipping globally, its cheaper to ship from a factory in China to US urban areas than from rural Iowa to US urban areas.

When the US railroads cascaded into bankruptcy circa 1970, Maytag had to effectively buy a rail line out of bankruptcy to avoid bankruptcy itself because it depended on Chicago as its transportation hub. The failed private rail managers who refused to incur the costs of getting faster than long haul trucks, were replaced by central planner appointed by government on a policy of cutting costs, decided the businesses in rural America, the Midwest, cost too much. So, they lost rail service. Thus tens of thousands of factories incurred hugh cost increases for trucking over rail, so they cut costs by closing or moving to urban areas where higher costs were desired. Like Mexico on the border where the cost of building capital to pay more workers higher wages to work longer hours was public policy. In Mexico, higher costs was seen as higher income. In the US, lower costs to the US and higher costs in Mexico was short term profits to US firms.

Economists never include dx/dt in their theories like physicists do, even though economists like to use physics like equations to describe economies. So, profits from moving production from Indianapolis to Mexico quickly vanish by "the invisible hand" of time and competition.

Its ironic when low cost policy pols seek inmigration of high cost individuals, then try to prevent high cost immigrants from driving up local living costs, eg, demanding better transportation, better schools, better housing, better food and services, better health services. These are things that can't be trucked in from Mexico, or by container from Asia.

But higher cost services mean job opportunities for the migrants from low cost rural America. Texas has lots of immigrants to produce high cost babies, but more come from low cost rural America than from Mexico. Its confusing that they seem to be Mexicans, bbecause they would have been Mexican if the war wasn't ended with Mexico by the US agreeing to make half the Mexicans US citizens. When ending the war with Spain, the US did not agree to make half the world's spanish US citizens. Only later were Puerto Ricans made US citizens, while the US decided to give up territory to cut costs of the people on those captured spanish lands.

Economies are zero sum. Economic growth requires higher costs. Tanstaafl.

The population () gained in the Mexican Cession and Gadsen Purchase was somewhere around 65,000 people including whites, pueblos, and Mission Indians (New Mexico/Arizona about 50K and California 10K) but not including uncontrolled native populations (Comanche, Navajo, Ute, Apache, Miwok, etc...). This was something like 1% of Mexico’s population, and unless you are talking about Northern NM/Trinidad, CO, or a few Mormon families there descendants are negligible in the modern US.

That line about the border crossing us may mean something in Española or Las Vegas, NM but it is meaningless on any national scale.

'Finally, the impact of Chinese imports appear to have disappeared after 2007 – we find strong employment impacts from 2000 to 2007, but nothing since from 2008 to 2015.'

A cynical person might just advance a reason for that lack of employment impact after 2007. Take Levis as an all-American example - Particularly when paired with this - 'Levi’s started closing U.S. facilities due to economic pressure from competitors with off-shore operations. I had left the company by that time but I know the Valencia Street plant closed in 2002 and all remaining U.S. owned manufacturing facilities closed in 2003 or thereabouts.' See? No impact to Levis American manufacturing employment between 2008-2015.

I think that is what the paper is saying.

Sort of. That the paper seemingly takes as given that the U.S. deindustrializing was not an empoyment issue is striking - 'Thus, while China appears historically responsible for large manufacturing job loss in the US, our results suggest this has not been a major factor for more than a decade.' Just one example, much like this is - 'Feenstra and Sasahara (2017) use a global input-output analysis to show that U.S. exports may have created demand for new jobs, primarily in the services sector, that offset job losses in manufacturing from Chinese imports from 1995-2011.'

Par for the MR course, actually, which is starting to take on an ever more obvious sheen of 'Après moi, le déluge.'

My father died of cancer in 2007. The good news is, after much analysis, the cancer hasn't done any harm since then.

The Chinese desire to crowd themselves into factories exceeds the European's desire.

We need to do something about these low human-capital areas in the South and mid-West. ZMP workers become low information voters who are clueless about how the world really works and keep digging themselves a bigger hole with dumb and dumber politics. Shitholes, basically.

Ah, the self-awareness of the committed troll.

He's mean but not wrong. The world rewards high human capital and punishes low human capital. US policy needs to adjust to this reality instead of putting its head in the sand.

Exactly, is all about survival of the fittest. You fail to keep up you become the next winner of a Darwin award.

I'll let you and JD Vance take a stab at that one. Have fun!

The question is, is the US still moving towards a new equilibrium or is it already there?

might have missed , very quick scan of the paper. Did they have any control factor for impact of the "great recession" (why not call it what it was: GDII)?

If not that seems like something someone should look at.

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