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Title: Import Competition, Regional Divergence, and the Rise of the Skilled City
Citation Type: Miscellaneous
Publication Year: 2019
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Abstract: Over the last decades, regions in the United States have been diverging. More skill-intensive areas have experienced a higher wage and skill premium growth at the same time that they became even more skill-intensive. This process deepened inequality both between and within urban areas, concentrating educated and high-earning workers into few cities. In this paper, I show that the substantial decline of manufacturing industries following the sharp rise of Chinese exports, and how local economies adapted to the loss of employment in those sectors, contributed significantly to the divergence among metropolitan areas in the US. Nonetheless, differences in local outcomes are not only the consequence of variations in industrial composition or exposure to foreign competition. Instead, I show in this paper that the consequences of international competition on local labor markets are highly heterogeneous. Even conditional on having manufacturing sectors with similar size and characteristics, the sign and magnitude of the effects of rising import competition depend critically on the characteristics of the rest of the local economy. In particular, I focus on how the share of local workforce with college education shapes the reaction to adverse shocks. Among more skill-intensive regions, greater exposure to import competition makes cities to attract college-educated workers and to increase college wages and skill premium. On the other hand, among less educated regions, foreign competition has negative effects in terms of college-educated workforce and wages. This result highlights that the contribution of trade to regional divergence critically depends on the ability of cities to adapt to adverse shocks.
Url: https://www.freit.org/WorkingPapers/Papers/Other/FREIT1540.pdf
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Authors: Gonzalez, Javier, Q
Publisher: FREIT
Data Collections: IPUMS USA
Topics: Education, Migration and Immigration, Population Mobility and Spatial Demography
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