The following work presents the main results of the article "US Exports and Employment" by Robert C. Feenstra, Hong Ma and Yuan Xu from September 2017. Moreover, this work will focus on the underlying econometric methodology and will discuss possible weaknesses. Further, the author examines the scientific potential of the article and its contribution to science.
The authors of the article used instrument variables regressions to examine the unbiased effects of the change in the US industry level import penetration from China and the change of US global industrial export exposure on US employment.
Increasing imports from China have been the subject of massive critics from the White House and in particular from President Donald Trump. One often repeated argument in favour of hampering imports from China has been the job losses in the manufacturing sector due to import competition. Although, various papers focus on job reducing effects of surging imports from China and the theory that export exposure creates jobs is well accepted, the effects on the US labour market due to changes in global export exposure had not been examined yet.
Table of Contents
1. Introduction
2. Industry level – Empirical Strategy
2.1 Instrument for change in industry level import penetration from China
2.2 Instruments for change of global industrial export exposure
3. Industry level - Investigating the effect of export growth and import exposure on employment
4. Specifications
5. Commuting zone level – Empirical Strategy
5.1 Instruments for change in industry level import penetration from China and change of global industrial export exposure
6. Commuting zone level - Investigating the effect of export growth and import exposure on employment
7. Critic
7.1 Validity of the used instrumental variables
8. Contribution
9. Conclusion
Research Objective and Key Themes
The primary objective of this paper is to examine the unbiased effects of changes in US industry-level import penetration from China and US global industrial export exposure on domestic manufacturing employment between 1991 and 2011. The work seeks to determine whether job losses from import competition were offset by job creation resulting from global export expansion.
- Econometric methodology and instrument variable regressions
- Comparison of US labor market responses on industry and commuting zone levels
- Analysis of global industrial export exposure vs. Chinese import competition
- Validity of instrumental variables and potential sources of bias
Excerpt from the Publication
Industry level – Empirical Strategy
Feenstra, Ma, and Xu worked with instrument variables regressions to examine the total effects of changes in global export and import penetration. Firstly, they constructed a regression with data on the industry level. The main idea is to find out how much of the job creation or job losses have been directly related to changes of export, import from China respectively. With the construction of a regression with the dependent variable employment in manufacturing sectors and the exogenous variables change of global industrial export exposure and change in the industry level import penetration from China, one receives estimators about the magnitude of the impact from the two exogenous variables. However, if one uses the US data for the change of global industrial export exposure and change in the industry level import penetration from China, one will experience certain problems with endogeneity.
When it comes to examining an unbiased estimator for change in industry level import penetration from China, unobserved domestic shocks in demand lead to a correlation between the exogenous variable import and the error term. Unobserved domestic demand shocks simultaneously affect import and employment. For example, if US citizens ask for more Computers, this will drive up the employment in sectors, which are involved in the Computer production. However, it will also raise the import of computers. It becomes necessary to construct an instrument, which is not affected by unobserved domestic demand shocks and only affected by foreign (Chinese) demand shocks. On the other hand, the exogenous variable change of global industrial export exposure faces problems with US supply shocks, which come from improvements in productivity. Many productivity improvements lead to less costly production, but with fewer jobs in these sectors. Hence these productivity improvements drive up exports and shrink employment, and corollary lead to a correlation of the variable change of global industrial export exposure and the error term.
Summary of Chapters
1. Introduction: This chapter introduces the research context regarding US-China trade tensions and outlines the study's focus on employment responses to export expansion and import competition.
2. Industry level – Empirical Strategy: This section details the regression framework and the necessity of instrumental variables to address endogeneity issues stemming from domestic demand and supply shocks.
3. Industry level - Investigating the effect of export growth and import exposure on employment: This chapter presents the results of the regressions, highlighting the offset between job losses from imports and job gains from exports in manufacturing.
4. Specifications: This section expands the analysis to other labor market outcomes, such as real shipment and wages, confirming the economic impact of trade.
5. Commuting zone level – Empirical Strategy: This chapter adapts the empirical model to 722 commuting zones using Bartik measures to capture localized labor market variations.
6. Commuting zone level - Investigating the effect of export growth and import exposure on employment: This chapter reports on the localized employment shifts and concludes that the net effect of trade on jobs was roughly balanced over the observed period.
7. Critic: This section evaluates the validity of the instrumental variables, questioning the exogeneity assumption and potential omitted variable bias.
8. Contribution: This chapter highlights the original research value of the study in quantifying the dual impact of import competition and export exposure.
9. Conclusion: The study synthesizes the findings, suggesting that while trade contributes to labor market fluctuations, the net employment impact was essentially neutralized by export-driven job creation.
Keywords
US employment, China import competition, global export exposure, instrumental variables, manufacturing sector, labor market, econometrics, endogeneity, commuting zones, trade policy, job creation, job losses, productivity, wage bill, industry-level analysis
Frequently Asked Questions
What is the core subject of this paper?
The paper evaluates the main results of the 2017 study "U.S. Exports and Employment" by Feenstra, Ma, and Xu, specifically focusing on how trade with China and global export exposure have impacted US manufacturing employment.
What are the primary thematic fields covered?
The themes include international trade economics, labor market dynamics, econometric modeling, and the validity of instruments used to isolate trade effects from domestic economic shocks.
What is the central research question?
The study aims to determine the extent to which job losses caused by Chinese import competition were offset by job creation resulting from US global export expansion between 1991 and 2011.
Which scientific methodology is applied?
The authors utilize instrument variable (IV) regressions at both the industry level and the commuting zone level to address endogeneity and estimate the unbiased effects of trade exposure.
What is addressed in the main body of the paper?
The main body details the empirical strategies, the construction of specific instrumental variables (such as Bartik measures), the results of the regression models, and a critical discussion of potential biases in those models.
Which keywords best characterize this work?
Key terms include US employment, import competition, global export exposure, instrumental variables, manufacturing, and labor market effects.
What were the major findings regarding net job losses?
The study found that between 1991 and 2011, the negative impacts of import competition were largely balanced by the positive impacts of global export growth, resulting in a net effect on employment that was approximately zero.
How does the author evaluate the validity of the instruments?
The author argues that while the relevance condition is met, there are legitimate concerns regarding the exogeneity condition, particularly whether the instruments might still correlate with the error term due to technological or productivity shocks.
- Arbeit zitieren
- Joshua Karcher (Autor:in), 2018, The effects on the US labour market due to changes in the global export exposure, München, GRIN Verlag, https://www.grin.com/document/496936
