Untangling Trade and Technology: Evidence from Local Labor Markets

From David Autor, David Dorn, and Gordon Hanson:

We juxtapose the effects of trade and technology on employment in U.S. local labor markets between 1990 and 2007. Labor markets whose initial industry composition exposes them to rising Chinese import competition experience significant falls in employment, particularly in manufacturing and among non-college workers. Labor markets susceptible to computerization due to specialization in routine task-intensive activities experience significant occupational polarization within manufacturing and nonmanufacturing but no net employment decline. Trade impacts rise in the 2000s as imports accelerate, while the effect of technology appears to shift from automation of production activities in manufacturing towards computerization of information-processing tasks in nonmanufacturing.

They conclude:

The impacts of trade and technology can be observed separately because local labor market exposure to technological change, as measured by specialization in routine task-intensive production and clerical occupations, is largely uncorrelated with local labor market exposure to trade competition from China.

Local labor markets with greater exposure to trade competition experience differential declines in manufacturing employment, with corresponding growth in unemployment and non-employment. The employment decline is not limited to production jobs but instead affects all major occupation groups. Employment losses are particularly large among workers without college education, for whom we also observe employment declines outside the manufacturing sector which may stem from local demand spillovers. While trade exposure reduces overall employment and shifts the distribution of employment between sectors, exposure to technological change has substantially different impacts, characterized by neutral effects on overall employment and substantial shifts in occupational composition within sectors. In particular, we find that susceptibility to technological change predicts declining employment in routine task-intensive production and clerical occupations both in the manufacturing and non-manufacturing sectors. For most demographic groups, these declines in routine employment are largely offset by increasing employment in abstract or manual-task-intensive occupations which tend to comprise the highest and lowest paid jobs in the economy. One exception is among women, for whom the reduction in routine-occupation employment translates to an overall decline in employment.

Concurrent with the rapid growth of U.S. imports from China, the effect of trade competition on the manufacturing sector has become stronger over time, while the effect of technological change on employment composition in the manufacturing sector has subsided. Conversely, the impact of technology on the non-manufacturing sector is growing as technological change seems to be shifting from automation of production in manufacturing to computerization of information processing in knowledge-intensive industries.

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About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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One Response to Untangling Trade and Technology: Evidence from Local Labor Markets

  1. Pingback: Links for 08-25-2013 | Symposium Magazine

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