Trade Adjustment: Worker Level Evidence

In the past two decades, China’s manufacturing exports have grown spectacularly. U.S. imports from China have surged, while U.S. exports to China have increased more modestly, consistent with the two countries’ divergent current account imbalances. Using data on individual earnings by employer from the Social Security Administration, we examine how exposure to import competition aects the long-term earnings and employment trajectory of workers initially employed in manufacturing industries. We find that workers who in 1991 were employed in industries that experienced high subsequent levels of import growth garner lower cumulative earnings over the subsequent sixteen years (1992 through 2007) and are at substantially elevated risk of obtaining Social Security Disability Insurance benefits as the only recorded source of income in a given year. More exposed individuals spend less time working for their initial employers, less time working in their initial two-digit manufacturing industries, and more time working elsewhere in manufacturing and outside of manufacturing. Eects on earnings and employment are larger for individuals whose initial employers were relatively large, whose initial wages where below their firm’s average, and who in the pre-sample period worked part time or intermittently. We obtain similar results using alternative measures of trade exposure. Our findings suggest that there is significant worker-level adjustment cost to import shocks and that adjustment is highly uneven across individuals according their conditions of employment in the pre-shock period.