IMPORT COMPETITION FROM THE EAST : What is the effect on domestic manufacturing employment?-Evidence from Sweden

Abstract: This thesis analyses the effect from an increase in import competition to Eastern Europe and China on Swedish manufacturing employment. This is done by conducting a panel data analysis, containing cross-sectional units of 11 Swedish SNI 2007 classified industries with a time period ranging from 1988 to 2008. The empirical results indicates that employment in the Swedish manufacturing sector is relative inelastic towards changes in import competition to China and Eastern Europe. On the aggregate, this effect is estimated to explain 1.7% of the actual job reduction in manufacturing employment between the years 1988 to 2008 under the assumption of exogenous regressors. Moreover, Swedish manufacturing employment seems to be more affected by the import shock from Eastern Europe than China.