15.02.2025Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization

In a recently published paper, Dorn and his co-authors examine how US labor markets and workers adjusted to increased Chinese import competition in the 2000s using data from 2000-2019.

Although employment-to-population ratios remained low, and manufacturing jobs continued to decline, employment levels in trade-exposed places rebounded after 2010. The researchers find out that this observed recovery is 𝘨𝘦𝘯𝘦𝘳𝘢𝘵𝘪𝘰𝘯𝘢𝘭 as the employment rebound in affected areas was driven primarily by young adults and foreign-born immigrants entering their first U.S. jobs in affected areas.

Contrary to traditional economic theories, which suggest that workers and capital should efficiently reallocate when an industry declines due to foreign competition, the Chinese trade shocks instead led to a decrease in geographic mobility.
Many incumbent workers experienced persistent earnings losses while aging in place, as communities underwent rapid demographic and industrial transitions.