Gains or Pains? Effects of US–China Trade on US Employment: Based on a WIOT Analysis from 2000 to 2014

ABSTRACT

This article examines the role of US–China trade in the changes of US employment. Through an input–output framework and structural decomposition analysis method, we decompose US employment and show the importance of all the determinants of employment in one place. The result shows that, over the period of 2000–2014, improvement in labor productivity was the dominant cause of US job losses, whereas only approximately 2% of the job decline was due to imports from China. The negative impact of imports from China for consumption demand is greater than for investment demand because imports from China for consumption demand have higher labor intensity. US employment depends on intermediate exports more than on final exports, and imports from China embody more services as intermediate inputs and, therefore, contribute indirectly to the employment of services in the US.

KEY WORDS:

• Employment
• indirect GVC effect
• SDA
• US-China trade

JEL CLASSIFICATION:

• F16
• F66

Supplementary material

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Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1. The methodology we use is similar to Feenstra and Sasahara (2017), but they set the year 1995 as the base year and estimate the changes in the other years. We compute the annual changes using the SDA method and we separate the effects of labor productivity changes and production technology changes, which Feenstra and Sasahara (2017) did not do.

2. In Table 7, the estimation about manufacture employment changes over 2000–2003 is different from the estimate in Table 4 by Baily and Lawrence (2004), as they did not separate the effect of the labor productivity changes from each final demand changes, and they did not consider the changes in IO structure either. But the implications are similar: that productivity growth and the weakness of US exports after 2000, rather than imports, should be held responsible for the US employment decline.

Additional information

Funding

This work was supported by the China National Philosophy and Social Science Fund Project [16BJL089]; China National Nature Science Fund Project [71573137].