Let's Look At The Impact Of Chinese Imports On Manufacturing

Paul Krugman

Photo: Dave Shankbone via Flickr

Rob Johnson of INET sends me to an interesting paper by Autor, Dorn and Hanson (pdf) that uses regional data to estimate the impact of China imports on manufacturing employment. The idea is to exploit the major differences among US metro areas in industrial specialisation: some areas produce a mix of goods that is in effect in China’s path, while others don’t. The results suggest, as I have been arguing, that it’s wrong to dismiss Chinese exports as not really being in competition with US production.Now, some people will ask, didn’t I used to be a free-trader? Yes, and under normal circumstances I still mostly am. But these are not normal circumstances! In an economy that isn’t in a liquidity trap, one can reasonably assume that jobs lost due to Chinese exports will be offset by jobs gained elsewhere, although that may be small comfort to the workers affected. Under current conditions, however, there is absolutely no reason to believe that there are offsetting gains — on the contrary, the losses to import competition are magnified through multiplier effects.

Read the rest of this post at The New York Times.

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