The China Syndrome: Local Labor Market Effects of Import Competition in the United States

Causal Question / Estimand

What is the effect of rising Chinese import competition (1990–2007) on U.S. local labor markets? The estimand is the effect of a change in import exposure per worker in a commuting zone on manufacturing employment, unemployment, labor-force participation, wages, and transfer receipts.

Identification Strategy

Import exposure is endogenous: U.S. imports from China partly reflect U.S. domestic demand shocks. The authors build a Shift-Share-Instrument in which cross-market variation in exposure comes from initial (base-period) local industry specialization (the shares) interacted with the growth of Chinese imports (the shocks). To purge the U.S.-demand-driven component of Chinese imports, they instrument U.S. import growth by industry with the contemporaneous growth of Chinese imports to eight other high-income countries, interacted with the same initial local industry shares. The identifying logic is that the surge in Chinese exports reflects China’s internal supply-side transformation, common across destination countries, and is excluded from U.S. local demand shocks.

Key Assumptions

• Shift-Share-Instrument — the other-high-income-country China shock, weighted by base-period local industry shares, isolates supply-driven import competition.
• Exclusion-Restriction — Chinese export growth to other rich countries affects U.S. local labor markets only through U.S. import competition, not through correlated global demand shocks; base-period shares predate the shock.
• Relevance — local industry mix strongly predicts realized U.S. import exposure.

Threats to Validity

A common global demand shock could drive both U.S. and other-high-income imports from China (violating exclusion); initial industry shares may be correlated with pre-existing local employment trends. Later shift-share methods papers re-examine exactly these concerns in this setting.

Setting / Data

722 U.S. commuting zones, 1990–2000 and 2000–2007; Census/ACS labor outcomes, UN Comtrade bilateral trade data, and transfer-program records.

Key Claims

• Rising Chinese import competition raises unemployment, lowers labor-force participation, and reduces wages in more exposed local labor markets.
• Import competition explains about one-quarter of the contemporaneous aggregate decline in U.S. manufacturing employment.
• Government transfer payments (unemployment, disability, retirement, healthcare) rise sharply in more trade-exposed markets, partially offsetting income losses.

Connections

• The leading modern application of the Shift-Share-Instrument; used as the running empirical example in both BorusyakEtAl2022-QuasiExperimentalShiftShare (shock exogeneity) and AdaoEtAl2019-ShiftShareDesigns (inference / standard errors).
• Same instrument family as BlanchardKatz1992-RegionalEvolutions and Card2001-ImmigrantInflows.
• See also IV.

Citation

Autor, D. H., Dorn, D., & Hanson, G. H. (2013). The China Syndrome: Local Labor Market Effects of Import Competition in the United States. American Economic Review, 103(6), 2121–2168.