The China Shock and Rich-World Jobs

Economic theory predicted that trade with a low-wage, labor-abundant economy would hurt some workers in rich countries, but many economists expected the effects to be modest and quickly absorbed. Research by David Autor, David Dorn and Gordon Hanson, published from 2013, challenged this view for the United States.

Studying regions most exposed to Chinese import competition after China joined the WTO, they found lasting losses of manufacturing jobs, lower wages and greater use of disability and other benefits, with workers often not moving to new jobs or places. They estimated that Chinese competition accounted for a significant share of US manufacturing job losses in the 2000s, alongside automation.

Other research stresses that consumers gained from lower prices and that exporters and service industries grew. The 'China shock' research reshaped debates by showing that national gains can coexist with concentrated, persistent local losses, raising questions about adjustment policies such as retraining and wage insurance.