Munich Personal RePEc Archive

International Trade and Local Labor Markets: Do Foreign and Domestic Shocks Affect Regions Differently?

Partridge, Mark and Dan S., Rickman and Olfert, M. Rose and Tan, Ying (2014): International Trade and Local Labor Markets: Do Foreign and Domestic Shocks Affect Regions Differently?

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Abstract

Despite the attention given to international trade in discussion of the economic struggles of many U.S. regions, it is unclear whether international trade shocks impact local economies more, or differently than shocks originating within the domestic economy. A challenge in making this discernment is separating trade shocks from common or domestic shocks. Therefore, using U.S. county-level data for 1990-2010, this study carefully constructs shocks to local economies, isolating those arising from international imports and exports to assess whether trade shocks have different effects from domestic shocks. In confirmatory analysis, we also employ a novel combination of IV and matching strategies. We examine a variety of indicators including employment growth, population growth, employment rates, wage rates and poverty rates. The results suggest that international trade shocks have some different effects than overall domestic shocks, though likely less than commonly perceived. We also find that domestic shocks dominate international trade shocks in explaining variation in regional labor market outcomes.

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