The effect of Chinese imports on EU employment

Abstract: Import competition is a concept suggesting that importing a good can cause a country’s domestic industry to face additional competition, thereby potentially harming the real return to factors used in the production of these goods. China’s impressive export growth caused by liberalization of trade policy since the 1980’s may be considered a supply shock of manufactured goods to the world market. Indeed, developed countries such as the US and the EU have seen a considerable increase in their Chinese imports in the last 20 years. In this paper, a measurement of exposure to import competition, adapted from Autor, Dorn & Hanson (2012) is used to assess the effect of Chinese import competition on employment in the manufacturing industry in 27 EU countries. The results presented here suggest a negative relationship between import exposure and employment and that early EU members are less sensitive to imports from China than late EU members. Also, some adaptations are suggested to improve the empirical approach.