Minimum wages and the China Syndrome: Causal evidence from US local labor markets
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Authors
Milsom, L.
Roland, I.
Publication Date
2021-10-07Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics, University of Cambridge
Type
Working Paper
Metadata
Show full item recordCitation
Milsom, L., & Roland, I. (2021). Minimum wages and the China Syndrome: Causal evidence from US local labor markets. https://doi.org/10.17863/CAM.79361
Abstract
Exposure to Chinese import competition led to significant manufacturing job losses in the United States. Local labor markets, however, differ significantly in how they fared with respect to manufacturing employment. An important question is whether labor market institutions have an impact on the dynamic response of manufacturing employment to rising import penetration. We contribute to this debate by showing that minimum wages amplified the negative effect of Chinese import penetration on manufacturing employment in US local labor markets between 2000 and 2007. We develop a rigorous double-edged identification strategy. First, we construct shift-share instrumental variables to address the endogeneity of import penetration. Second, we use a border identification strategy to distinguish the effects of minimum wage policies from the effects of other local labor market characteristics that are unrelated to policy. Specifically, we rely on comparing commuting zones that are contiguous to each other but located in different states with different minimum wage policies. The approach essentially considers what happens to the response of manufacturing employment to import penetration when one crosses a policy border.
Keywords
Import penetration, labor market institutions, minimum wages, manufacturing employment
Identifiers
CWPE2170
This record's DOI: https://doi.org/10.17863/CAM.79361
This record's URL: https://www.repository.cam.ac.uk/handle/1810/331912
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