Using confidential US Census micro data we find three results. First, there is no evidence that Chinese import competition generated net job losses. In low-human capital areas (for example, much of the South and mid-West) manufacturing saw large job losses, driven by plant shrinkage and closure. But in high-human capital areas (for example, much of the West Coast or New England) manufacturing job losses were limited, with much larger gains in service employment, particularly in research, management and wholesale. As such, Chinese competition reallocated employment from manufacturing to services, and from the US heartland to the coasts. Second, looking at the firm-level data we find almost all of the manufacturing job losses are in large, multinational firms that are simultaneously expanding in services. Hence, these large firms appear to have offshored manufacturing employment while creating US service sector jobs. Indeed, we show large publicly traded US firms do not seem to have been negatively impacted by the rise in Chinese imports. Finally, the impact of Chinese imports disappears after 2007 – we find strong employment impacts from 2000 to 2007, but nothing since from 2008 to 2015.
Secondly, we now know that the cost of living fell more slowly for the rich during the 19th century than it did for the poor. Research in the early 2000s by Peter Lindert, David Jacks, Patricia Levin, and Philip Hoffman revealed that, in Britain, there was a pronounced egalitarian trend from 1800 onward. In subsequent research forthcoming in Cliometrica, Peter Lindert and myself extend this work to Canada, the United States, and Australia. We found a similar trend: the cost of living of the poor was falling much faster than that of the rich.
Why? One reason is that the productivity of the poor was rising so fast that their wages were increasing. However, these wages were a key component of the services that weighed much more heavily in the basket of goods and services consumed by the rich.
Arnold Kling nicely captures the essence of too much graduate work today in economics – work that Arnold describes as “a form of fraternity hazing using math exercises.” (GMU Econ discourages this insanity.)