NEW YORK – At the center of the ongoing trade dispute between the two countries is a claim that trading with China costs millions of Americans their jobs. But according to new research from Shang-Jin Wei, N T Wang Professor of Chinese Business and Economy and a Chazen Senior Scholar at Columbia Business School, the reality is not only positive for U.S. job growth, but also wage growth.
In the paper, “Re-Examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective,” Wei and co-authors Zhi Wang, Xinding Yu, and Kunfu Zhu examine the total effect of trading with China. This is the first study of its kind to consider both downstream and upstream effects of imports from China.
The researchers find that direct competition alone does, in fact, reduce manufacturing sector employment. In addition, they show that an indirect upstream channel further exacerbates job losses in both manufacturing and non-manufacturing sectors. But these measures don’t tell the whole story.
Counter to the popular narrative, the overall job gains from the indirect downstream channel offset the combined negative effects of both direct competition and the upstream channel. Considering all three channels of exposure to trading with China, the researchers account for a net job increase of 1.27 percent per year from 2000-2007. Furthermore, the findings reveal that 75 percent of workers experience a real wage growth as a result of trading with China.
For more information, please read the related Chazen Institute research brief (PDF).
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About the Jerome A. Chazen Institute for Global Business
The Jerome A. Chazen Institute for Global Business is the interdisciplinary hub of global business knowledge at Columbia Business School. By injecting a global viewpoint into coursework, supporting research on global business, and sponsoring provocative forums where business leaders and policy-makers engage in vigorous debate, we pool the vast wealth of knowledge that exists within Columbia Business School, distill it for people who operate in the world’s marketplace, and provide a global network for lifelong learning.
About Shang-Jin Wei
Shang-Jin Wei is the N T Wang Professor of Chinese Business and Economy and a Chazen Senior Scholar at Columbia Business School. He is also a professor of finance and economics at Columbia University’s School of International and Public Affairs.
Wei’s research has been published in top academic journals including American Economic Review, Journal of Political Economy, Quarterly Journal of Economics, Journal of Finance, Review of Financial Studies, Journal of International Economics, and Journal of Development Economics, and reported in popular media including Financial Times, The Wall Street Journal, The Economist, Bloomberg Businessweek, The New York Times, U.S. News and World Report, South China Morning Post, and other international media organizations.
During 2014-2016, Wei served as Chief Economist of the Asian Development Bank (ADB) and Director General of its Economic Research and Regional Cooperation Department. He was ADB’s chief spokesperson on economic trends and economic development in Asia, advised ADB’s President on economic development issues, led the ADB’s analytical support for regional cooperation including ASEAN+3 (China, Japan, and Korea) and APEC, and conducted research on macroeconomic, financial, labor market, and globalization issues.
Prior to his Columbia appointment in 2007, he was Assistant Director and Chief of Trade and Investment Division at the International Monetary Fund (IMF). He was the IMF’s Chief of Mission to Myanmar (Burma) in 2004. He previously held the positions of Associate Professor of Public Policy at Harvard University, the New Century Chair in Trade and International Economics at the Brookings Institution, and Advisor at the World Bank.
He has been a consultant to numerous government organizations including the U.S. Board of Governors of the Federal Reserve System, United Nations Economic Commission on Europe, the United Nations Development Program, and to private companies including PricewaterhouseCoopers.
Wei holds a PhD in economics and MS in finance from the University of California, Berkeley.