Looking for Local Labor Market Effects of NAFTA

Abstract

Using US Census data for 1990-2000, we estimate effects of NAFTA on US wages. We look for effects of the agreement by industry and by geography, measuring each industry's vulnerability to Mexican imports, and each locality's dependance on vulnerable industries. We find evidence of both effects, dramatically lowering wage growth for blue-collar workers in the most affected industries and localities (even for service-sector workers in affected localities). These distributional effects are much larger than aggregate welfare effects estimated by other authors. In addition, we find strong evidence of anticipatory adjustment in places whose protection was expected to fall but had not yet fallen; this adjustment appears to have conferred an anticipatory rent to workers in those locations.

Trade Adjustment: Worker Level Evidence

“…Workers with lower labor force attachment, shorter tenure, and lower earnings incur disproportionate losses in subsequent earnings and employment, while losses for workers with high initial earnings are generally quite modest. These results stand in sharp contrast to earlier literature studying mass layoffs, which broadly finds that earnings losses for affected workers are sizable and relatively uniform across demographic groups (Jacobson, LaLonde and Sullivan, 1993;Chan and Stevens, 2001;von Wachter, 14 See Bernard, Jensen, and Schott (2006), Verhoogen (2008), Amiti and Davis (2012), and Hummels, Jorgensen, Munch, and Xiang (2011) on trade shocks at the firm level; Goldberg and Pavcnick (2003), Artuc, Chaudhuri, and McLaren (2010), McLaren and Hakobyan (2010), Ebenstein, Harrison, McMillan, and Phillips (2011), and Menezes-Filho and Muendler (2011) on trade shocks at the industry and occupation level; and Chiquiar (2008), Kovak (forthcoming), Topalova (2010), and Autor, Dorn, and Hanson (forthcoming) on trade shocks at the region level.…”

Trade Adjustment: Worker Level Evidence

“…Workers with lower labor force attachment, shorter tenure, and lower earnings incur disproportionate losses in subsequent earnings and employment, while losses for workers with high initial earnings are generally quite modest. These results stand in sharp contrast to earlier literature studying mass layoffs, which broadly finds that earnings losses for affected workers are sizable and relatively uniform across demographic groups (Jacobson, LaLonde and Sullivan, 1993;Chan and Stevens, 2001;von Wachter, 14 See Bernard, Jensen, and Schott (2006), Verhoogen (2008), Davis (2012), andHummels, Jorgensen, Munch, andXiang (2011) on trade shocks at the firm level; Goldberg and Pavcnick (2003), Artuc, Chaudhuri, and McLaren (2010), McLaren and Hakobyan (2010), Ebenstein, Harrison, McMillan, andPhillips (2011), andMenezes-Filho andMuendler (2011) on trade shocks at the industry and occupation level; and Chiquiar (2008), Kovak (forthcoming), Topalova (2010), and Autor, Dorn, and Hanson (forthcoming) on trade shocks at the region level.…”

The Great Recession and Nonmetropolitan America

“…This may be attributable to the availability of excess labor supply in manufacturing areas because of the recession. Alternatively, it could be that labor avoided manufacturing dependent areas because of anticipatory effects related to trade (McLaren and Hakobyan, ) and productivity, causing jobs to be filled by previous local residents.…”