Presentation of the paper

The Rise of the East and the Far East: German Labor Markets and Trade Integration

Speaker

Jens Suedekum

University of Duisburg-Essen

Abstract

Wolfgang Dauth (IAB),Sebastian Findeisen (University of Zurich), Jens Suedekum (University of Duisburg-Essen)

The unprecedented economic rise of Eastern Europe and China in the last two decades has triggered concerns in developed Western market economies about adverse effects for domestic labor markets trough increased import competition. Simultaneously, exports from developed countries to these new destination markets have also surged. We analyze the  effect of this enormous rise in trade inte-gration on German labor markets between 1988 and 2008, using detailed admin-istrative data. We exploit the variation in initial industry structure across German regions before the onset of these trade shocks, and instrument for regional import and export exposure using trade flows from other high-income countries. We find large effects of export and import exposure to Eastern Europe: On average, exports are estimated to have increased the share of manufacturing employment in the working age population by 3.71 percentage points, whereas imports decreased manufacturing employment by 2.17 percentage points. We find smaller effects of export exposure with China on the employment margin, while imports from China appear to have no effect at all. We complement our findings with results on regional population shifts, inequality, and unemployment. Using data at the worker level, we show that workers specialized in exporting industries before the onset of trade shocks, have a higher probability of subsequently being employed. Exports (Imports) also have a (de-)stabilizing effect on employment outcomes, defined as working in the same plant, industry, or region.

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