Trade and labor markets: Lessons from China’s rise
The China Shock has challenged economists’ benign view of how trade integration affects labor markets in developed countries
Keywords: trade adjustment, manufacturing, non-college workers, China Shock
Economists have long recognized that free trade has the
potential to raise countries’ living standards. But what
applies to a country as a whole need not apply to all
its citizens. Workers displaced by trade cannot change
jobs costlessly, and by reshaping skill demands, trade
integration is likely to be permanently harmful to some
workers and permanently beneficial to others. The “China
Shock”—denoting China’s rapid market integration in the
1990s and its accession to the World Trade Organization
in 2001—has given new, unwelcome empirical relevance to
[size=14.666666984558105px]these theoretical insights.