Paul Krugman: Lecture in Melbourne... in Honor of... Max Corden: "One of the things I'm revisiting is the 'China shock' issue, which I think remains widely misunderstood. The claim is not that rapid import growth cost the U.S. jobs on net. It is that the jobs created were different from the jobs lost, and in particular in different places. That is, economic geography played a crucial role. The forces of localization mean that many localities, especially smaller towns and cities, are highly specialized in particular industries—and get hit hard if those industries shrink for whatever reason...

...A case in point: furniture production is one of those sectors that lost a substantial fraction of its jobs to imports. At a national level those job losses were tiny, lost in statistical noise. But furniture production was highly localized in Hickory, NC. So if you look at job losses from the industry's peak in 2000 to the eve of the Great Recession, relative to total employment, it was minor for the nation, fairly big for NC, devastating for Hickory. In terms of modeling, the interaction between economic geography and trade means that the medium-term distributional impacts look more like specific factors—labor specific to particular industries—than the kind of broader distributional issues we often consider...


#noted

Comments