The Economic Consequences of Trade and Immigration for Local Labor - PDF document

The Economic Consequences of Trade and Immigration for Local Labor Markets Gordon Hanson University of California, San Diego And National Bureau of Economic Research Presentation delivered at the 2013 Annual Meeting of the International Agricultural Trade Research Consortium (IATRC) Clearwater Beach, FL, December 15-17, 2013

❚❤❡ ❊❝♦♥♦♠✐❝ ❈♦♥s❡q✉❡♥❝❡s ♦❢ ❚r❛❞❡ ❛♥❞ ■♠♠✐❣r❛t✐♦♥ ❢♦r ▲♦❝❛❧ ▲❛❜♦r ▼❛r❦❡ts ●♦r❞♦♥ ❍❛♥s♦♥ ❯❈❙❉ ❛♥❞ ◆❇❊❘ ❉❡❝❡♠❜❡r ✷✵✶✸

❚r❛♥s❢♦r♠❛t✐♦♥ ♦❢ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❚❡❝❤♥♦❧♦❣✐❝❛❧ ❝❤❛♥❣❡

❚r❛♥s❢♦r♠❛t✐♦♥ ♦❢ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❘✐s✐♥❣ ♦❢ ❡♠❡r❣✐♥❣ ❡❝♦♥♦♠✐❡s

❚r❛♥s❢♦r♠❛t✐♦♥ ♦❢ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❙✉♣♣❧②✲♣✉s❤ ✐♠♠✐❣r❛t✐♦♥ Total fertility rate (live births per woman) 7 6 5 4 3 2 1 1960 1970 1980 1990 2000 2010 Year Mexico USA

❚r❛♥s❢♦r♠❛t✐♦♥ ♦❢ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❚❡❝❤♥♦❧♦❣②✱ tr❛❞❡✱ ✐♠♠✐❣r❛t✐♦♥ • ▲❛❜♦r ♠❛r❦❡t s❤♦❝❦s • ■❚ r❡✈♦❧✉t✐♦♥ ❤❛s ❧❡❞ t♦ ❛✉t♦♠❛t✐♦♥ ♦❢ r♦✉t✐♥❡ t❛s❦s✱ r❡❞✉❝✐♥❣ ❞❡♠❛♥❞ ❢♦r ♠✐❞❞❧❡✲s❦✐❧❧ ✇♦r❦❡rs ✭❆✉t♦r ✫ ❉♦r♥✮ • ❘✐s❡ ♦❢ ❈❤✐♥❛ ❤❛s ✐♥❝r❡❛s❡❞ ✐♠♣♦rt ❝♦♠♣❡t✐t✐♦♥ ❢♦r ❯❙ ♠❛♥✉❢❛❝t✉r✐♥❣✱ r❡❞✉❝✐♥❣ ❧❛❜♦r ❞❡♠❛♥❞ ✭❆✉t♦r ❉♦r♥ ✫ ❍❛♥s♦♥✮ • ❙❤❛r♣ r✐s❡ ✐♥ ✐♠♠✐❣r❛t✐♦♥ ♦❢ ✈❡r② ❧♦✇ s❦✐❧❧❡❞✱ ✈❡r② ❤✐❣❤ s❦✐❧❧❡❞ ❤❛s r❡❞✉❝❡❞ ✇❛❣❡s ❢♦r s♦♠❡ ❯❙ ✇♦r❦❡rs ✭❇♦r❥❛s✮ • ❍♦✇ ❞♦ ✇❡ s❡♣❛r❛t❡ ✐♠♣❛❝t ♦❢ t❤❡s❡ s❤♦❝❦s ❢r♦♠ ❡❛❝❤ ♦t❤❡r ❛♥❞ ❢r♦♠ ♦t❤❡r ❝♦♥❢♦✉♥❞✐♥❣ ❢❛❝t♦rs❄ • ❊①♣❧♦✐t ✈❛r✐❛t✐♦♥ ❛❝r♦ss ❧♦❝❛❧ ❧❛❜♦r ♠❛r❦❡ts

❆❣❡♥❞❛ ✶ ▲❛❜♦r ♠❛r❦❡t s❤♦❝❦s ✷ ▲♦❝❛❧ ▲❛❜♦r ▼❛r❦❡t ❊①♣♦s✉r❡ ✸ ▲❛❜♦r ▼❛r❦❡t ■♠♣❛❝ts

❚r❛❞❡ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❙✉r❣❡ ✐♥ ❈❤✐♥❛✬s ♠❛♥✉❢❛❝t✉r✐♥❣ ❡①♣♦rt ❝❛♣❛❝✐t② Shares of world manufacturing value added 20 15 percent 10 5 0 1980 1985 1990 1995 2000 2005 2010 Year China Other emerging economies Brazil, India, Russia Frontier economies

❚r❛❞❡ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❯❙ ✐♠♣♦rts ❢r♦♠ ❈❤✐♥❛ ❃✗❃ ❯❙ ❡①♣♦rts t♦ ❈❤✐♥❛ Trade&Flows&Between&U.S.&and&&China& (Billions&of&2007&US&Dollars) & 1991& 2000& 2007& $400&bil& $350&bil& $330.0&bil& $300&bil& $250&bil& $200&bil& $150&bil& $121.6&bil& $100&bil& $57.4&bil& $50&bil& $26.3&bil& $23.0&bil& $10.3&bil& $0&bil& Imports& Exports&

❚r❛❞❡ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t Pr♦❞✉❝t✐♦♥ ✇♦r❦❡rs ❛r❡ ❤✐❣❤❧② ❡①♣♦s❡❞ t♦ ❈❤✐♥❛ ✐♠♣♦rts Growth of Trade Exposure vs Share of Production Workers Share of Production Workers 1991 1 .8 .6 .4 .2 0 20 40 60 80 100 Growth of Import Penetration 1991-2007 food/tobacco (0.6) textile/apparel/leather (16.7) wood/furniture (15.2) paper/print (1.4) chemical/petroleum (1.4) plastic/rubber/glass (7.0) metal/metal products (6.1) machines/electrical (15.2) transportation (1.7) toys/other (32.6) Notes: Numbers in parentheses in the legend indicate average growth of import penetration within industry group, weighted by 1991 employment. Values for growth of import penetraton are winsorized at 100.

❚r❛❞❡ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ■♠♣♦rt ♣❡♥❡tr❛t✐♦♥ ❛♥❞ ❞❡❝❧✐♥✐♥❣ ❯❙ ♠❛♥✉❢❛❝t✉r✐♥❣ .05 .14 .04 Manufacturing emp/pop .12 Import penetration .03 .02 .1 .01 .08 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Year China import penetration ratio Manufacturing employment/Population

■♠♠✐❣r❛t✐♦♥ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❙❤❛r♣ ✐♥❝r❡❛s❡ ✐♥ ❧♦✇✲s❦✐❧❧❡❞ ✐♠♠✐❣r❛t✐♦♥ Foreign born share of hours worked by education group .5 .4 .3 .2 .1 0 1993 1996 1999 2002 2005 2008 2011 Year less than high school high school degree some college college degree advanced degree (Source: CPS, 1994 to 2012.)

■♠♠✐❣r❛t✐♦♥ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ❇✉t ❧♦✇✲s❦✐❧❧❡❞ ❛r❡ ❡✈❡r s♠❛❧❧❡r s❤❛r❡ ♦❢ t♦t❛❧ ❧❛❜♦r ❢♦r❝❡ Share of hours worked by education group .4 .3 .2 .1 0 1993 1996 1999 2002 2005 2008 2011 Year less than high school high school degree some college college degree advanced degree (Source: CPS, 1994 to 2012.)

■♠♠✐❣r❛t✐♦♥ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ■♠♠✐❣r❛♥ts ❞♦♠✐♥❛t❡ ❙❚❊▼ ❡♠♣❧♦②♠❡♥t Foreign born share of employment, STEM occupations (%) 50 40 30 20 10 1993 1996 1999 2002 2005 2008 2011 Year workers in STEM occupations with BA degree workers in STEM occupations with advanced degree (Source: CPS, 1994 to 2012.)

■♠♠✐❣r❛t✐♦♥ ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ■♠♠✐❣r❛♥ts ❡s♣❡❝✐❛❧❧② ❞♦♠✐♥❛t❡ ✐♥ ❝♦♠♣✉t❡r ✜❡❧❞s Foreign born worker share, MA degree Operations Research Other Engineers Network Administrators Computer Scientists Electrical Engineers Software Engineers Software Developers 10 20 30 40 50 60 70 share of employment (%) (Source: ACS 2009, 2010, 2011.)

❚❡❝❤♥♦❧♦❣② ❛♥❞ t❤❡ ❯❙ ❧❛❜♦r ♠❛r❦❡t ▼✐❞❞❧❡✲✇❛❣❡ ✇♦r❦❡rs ❛r❡ ❝♦♥❝❡♥tr❛t❡❞ ✐♥ r♦✉t✐♥❡ t❛s❦s .7 .6 .5 Routine Occupation Share .4 .3 .2 .1 0 0 20 40 60 80 100 Skill Percentile (Ranked by 1980 Occupational Mean Wage) Share of ‘Routine’ Occupations by Occupational Skill Percentile

❆❣❡♥❞❛ ✶ ▲❛❜♦r ♠❛r❦❡t s❤♦❝❦s ✷ ▲♦❝❛❧ ▲❛❜♦r ▼❛r❦❡t ❊①♣♦s✉r❡ ✸ ▲❛❜♦r ▼❛r❦❡t ■♠♣❛❝ts

❈♦♠♠✉t✐♥❣ ③♦♥❡s ❛s ❣❡♦❣r❛♣❤✐❝ ✉♥✐t ♦❢ ❛♥❛❧②s✐s • ❈❧✉st❡r ♠❛✐♥❧❛♥❞ ❯❙ ❝♦✉♥t✐❡s ✐♥ ✼✷✷ ❝♦♠♠✉t✐♥❣ ③♦♥❡s✖str♦♥❣ ❝♦♠♠✉t✐♥❣ t✐❡s ✇✐t❤✐♥ ❛ ❈❩✱ ✇❡❛❦ ❝♦♠♠✉t✐♥❣ t✐❡s ❛❝r♦ss ❈❩s

❙♣❛t✐❛❧ ✈❛r✐❛t✐♦♥ ✐♥ ❡①♣♦s✉r❡ • ❲❤✐❝❤ r❡❣✐♦♥s ❛r❡ ❡①♣♦s❡❞ t♦ ❧❛❜♦r✲♠❛r❦❡t s❤♦❝❦s❄ • ❘❡❣✐♦♥s ❞✐✛❡r str♦♥❣❧② ✐♥ t❤❡✐r ✐♥❞✉str✐❛❧ s♣❡❝✐❛❧✐③❛t✐♦♥ • ■♥✐t✐❛❧ ♣❛tt❡r♥s ❝r❡❛t❡ ✈❛r✐❛t✐♦♥ ✐♥ ❧❛t❡r ❡①♣♦s✉r❡ t♦ tr❛❞❡✱ t❡❝❤♥♦❧♦❣② ✭❧♦❣✐❝ ❞♦❡s♥✬t ❛♣♣❧② t♦ ✐♠♠✐❣r❛t✐♦♥✱ ✇❤✐❝❤ tr❛❝❦s ❧❛❜♦r ❞❡♠❛♥❞✮ • ❆♣♣r♦❛❝❤ r❡q✉✐r❡s t❤❛t ♦✉t♠✐❣r❛t✐♦♥ r❡s♣♦♥s❡ t♦ s❤♦❝❦s ✐s ✇❡❛❦ • ❘❡❣✐♦♥❛❧ ❡①♣♦s✉r❡ t♦ tr❛❞❡ ✇✐t❤ ❈❤✐♥❛ • ❙✉♠ ♦✈❡r ✐♥❞✉str✐❡s ✭✶✾✾✷✲✷✵✵✼ ❝❤❛♥❣❡ ✐♥ ♥❛t✐♦♥❛❧ ✐♥❞✉str② ✐♠♣♦rts ♣❡r ✇♦r❦❡r × ✐♥❞✉str②✬s ✶✾✾✶ s❤❛r❡ ♦❢ ❈❩ ❡♠♣❧♦②♠❡♥t✮ • ❘❡❣✐♦♥❛❧ ❡①♣♦s✉r❡ t♦ t❡❝❤♥♦❧♦❣② s❤♦❝❦s • ✶✾✽✵ s❤❛r❡ ♦❢ ❈❩ ❡♠♣❧♦②♠❡♥t ✐♥ r♦✉t✐♥❡✲t❛s❦✲✐♥t❡♥s✐✈❡ ♦❝❝✉♣❛t✐♦♥s ✭❛s ♦♣♣♦s❡❞ t♦ ❛❜str❛❝t✲t❛s❦ ♦r ♠❛♥✉❛❧✲t❛s❦ ♦❝❝✉♣❛t✐♦♥s✮

❘❡❣✐♦♥❛❧ ❡①♣♦s✉r❡ t♦ tr❛❞❡ ✇✐t❤ ❈❤✐♥❛

❘❡❣✐♦♥❛❧ ❡①♣♦s✉r❡ t♦ r♦✉t✐♥✐③❛t✐♦♥

❋❡✇ r❡❣✐♦♥s ❛r❡ ❡①♣♦s❡❞ t♦ ❜♦t❤ tr❛❞❡ ❛♥❞ t❡❝❤♥♦❧♦❣②