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Worker and firm responses to trade shocks: The UK-China case

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  • De Lyon, Josh
  • Pessoa, Joao Paulo
Abstract
We exploit the recent surge in Chinese export growth to study the effects of a trade shock on workers and firms in a foreign market, the UK, in the period 2000–2007. We find that individuals initially employed in sectors highly exposed to growth in imports from China experienced lower income growth and remained out of employment longer than workers in sectors that were less exposed to import competition. The effects are heterogeneous, with initially lower-paid workers suffering more in terms of employment and earnings than those initially better-paid, and female workers experiencing a greater relative fall in total earnings than males, mostly through reduced years of employment. Plants in industries more exposed to Chinese products displayed lower employment growth and higher probability of going out of business than plants in sectors more insulated from competition with China, with stronger effects for larger plants.

Suggested Citation

  • De Lyon, Josh & Pessoa, Joao Paulo, 2021. "Worker and firm responses to trade shocks: The UK-China case," European Economic Review, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:eecrev:v:133:y:2021:i:c:s0014292121000313
    DOI: 10.1016/j.euroecorev.2021.103678
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    Cited by:

    1. Peter Levell & Matthias Parey & Aitor Irastorza-Fadrique, 2023. "Household responses to trade shocks," IFS Working Papers W23/13, Institute for Fiscal Studies.
    2. Josh De Lyon & Swati Dhingra, 2020. "Covid-19 and Brexit: Real-time updates on business performance in the United Kingdom," CEP Covid-19 Analyses cepcovid-19-006, Centre for Economic Performance, LSE.
    3. Sónia Cabral & Pedro S. Martins & João Pereira dos Santos & Mariana Tavares, 2021. "Collateral Damage? Labour Market Effects of Competing with China—at Home and Abroad," Economica, London School of Economics and Political Science, vol. 88(350), pages 570-600, April.
    4. Haiping Zhang, 2023. "Trade‐induced sectoral upgrading and upstream financial flows," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(3), pages 859-896, August.
    5. Karin Mayr-Dorn & Gaia Narciso & Duc Anh Dang & Hien Phan, 2023. "Trade diversion and labor market adjustment: Vietnam and the U.S.-China trade war," Trinity Economics Papers tep0923, Trinity College Dublin, Department of Economics.
    6. Josh De Lyon & Swati Dhingra, 2021. "The impacts of Covid-19 and Brexit on the UK economy: early evidence in 2021," CEP Covid-19 Analyses cepcovid-19-021, Centre for Economic Performance, LSE.
    7. Shuhei Kainuma & Yukiko U. Saito, 2022. "China's impact on regional employment: Propagation through input–output linkages and co‐location patterns," The World Economy, Wiley Blackwell, vol. 45(11), pages 3559-3601, November.
    8. Aitor Irastorza-Fadrique & Peter Levell & Matthias Parey, 2024. "Household responses to trade shocks," IFS Working Papers W24/07, Institute for Fiscal Studies.
    9. Aitor Irastorza-Fadrique & Peter Levell & Matthias Parey, 2024. "Household responses to trade shocks," IFS Working Papers W24/52, Institute for Fiscal Studies.

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    More about this item

    Keywords

    Employment; Wage; Plant dynamics; Globalization; UK economy; Import competition;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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