The Effect of Import Competition Across Occupations

Abstract

We empirically examine the effect of import competition on worker earnings across occupations. To guide our analysis, we develop a stylized model that emphasizes industries using occupations in different intensities. We show that an occupational exposure index summarizes the overall exposure of an occupation to industry-level trade shocks. Proxying these industry-level trade shocks with rising Chinese competition and using nationally representative matched employer–employee French panel data from 1993 through 2015, we obtain evidence consistent with the predictions of the model. We find that workers initially employed in occupations highly exposed to Chinese competition – as measured by our occupational exposure index – experience larger declines in earnings. The magnitude of our estimates implies that the effect of rising Chinese competition on workers’ earnings due to differences in workers’ occupations is of comparable magnitude to the effect of workers’ sector of employment. This finding suggests that accounting for the distributional effects of trade across occupations is quantitatively important.