We analyze the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000'2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to-population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service sectors like medical services, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery instead stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominately exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions.
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Transitional Costs and the Decline of Coal: Worker-Level Evidence
September 2024
Working Paper Number:
CES-24-53
We examine the labor market impacts of the U.S. coal industry's decline using comprehensive administrative data on workers from 2005-2021. Coal workers most exposed to the industry's contraction experienced substantial earnings losses, equivalent to 1.6 years of predecline wages. These losses stem from both reduced employment duration (0.37 fewer years employed) and lower annual earnings (17 percent decline) between 2012-2019, relative to similar workers less exposed to coal's decline. Earnings reductions primarly occur when workers remain in local labor markets but are not employed in mining. While coal workers do not exhibit lower geographic mobility, relocation does not significantly mitigate their earnings losses.
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The China Shock Revisited: Job Reallocation and Industry Switching in U.S. Labor Markets
October 2024
Working Paper Number:
CES-24-65
Using confidential administrative data from the U.S. Census Bureau we revisit how the rise in Chinese import penetration has reshaped U.S. local labor markets. Local labor markets more exposed to the China shock experienced larger reallocation from manufacturing to services jobs. Most of this reallocation occurred within firms that simultaneously contracted manufacturing operations while expanding employment in services. Notably, about 40% of the manufacturing job loss effect is due to continuing establishments switching their primary activity from manufacturing to trade-related services such as research, management, and wholesale. The effects of Chinese import penetration vary by local labor market characteristics. In areas with high human capital, including much of the West Coast and large cities, job reallocation from manufacturing to services has been substantial. In areas with low human capital and a high initial manufacturing share, including much of the Midwest and the South, we find limited job reallocation. We estimate this differential response to the China shock accounts for half of the 1997-2007 job growth gap between these regions.
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Location, Location, Location
October 2021
Working Paper Number:
CES-21-32R
We use data from the Longitudinal Employer-Household Dynamics program to study the causal effects of location on earnings. Starting from a model with employer and employee fixed effects, we estimate the average earnings premiums associated with jobs in different commuting zones (CZs) and different CZ-industry pairs. About half of the variation in mean wages across CZs is attributable to differences in worker ability (as measured by their fixed effects); the other half is attributable to place effects. We show that the place effects from a richly specified cross sectional wage model overstate the causal effects of place (due to unobserved worker ability), while those from a model that simply adds person fixed effects understate the causal effects (due to unobserved heterogeneity in the premiums paid by different firms in the same CZ). Local industry agglomerations are associated with higher wages, but overall differences in industry composition and in CZ-specific returns to industries explain only a small fraction of average place effects. Estimating separate place effects for college and non-college workers, we find that the college wage gap is bigger in larger and higher-wage places, but that two-thirds of this variation is attributable to differences in the relative skills of the two groups in different places. Most of the remaining variation reflects the enhanced sorting of more educated workers to higher-paying industries in larger and higher-wage CZs. Finally, we find that local housing costs at least fully offset local pay premiums, implying that workers who move to larger CZs have no higher net-of-housing consumption.
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Industry Wage Differentials: A Firm-Based Approach
August 2023
Working Paper Number:
CES-23-40
We revisit the estimation of industry wage differentials using linked employer-employee data
from the U.S. LEHD program. Building on recent advances in the measurement of employer wage premiums, we define the industry wage effect as the employment-weighted average workplace premium in that industry. We show that cross-sectional estimates of industry differentials overstate the pay premiums due to unmeasured worker heterogeneity. Conversely, estimates based on industry movers understate the true premiums, due to unmeasured heterogeneity in pay premiums within industries. Industry movers who switch to higher-premium industries tend to leave firms in the origin sector that pay above-average premiums and move to firms in the destination sector with below-average premiums (and vice versa), attenuating the measured industry effects. Our preferred estimates reveal substantial heterogeneity in narrowly-defined industry premiums, with a standard deviation of 12%. On average, workers in higher-paying industries have higher observed and unobserved skills, widening between-industry wage inequality. There are also small but systematic differences in industry premiums across cities, with a wider distribution of pay premiums and more worker sorting in cities with more highpremium firms and high-skilled workers.
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Did Timing Matter? Life Cycle Differences in Effects of Exposure
to the Great Recession
September 2019
Working Paper Number:
CES-19-25
Exposure to a recession can have persistent, negative consequences, but does the severity of those consequences depend on when in the life cycle a person is exposed? I estimate the effects of exposure to the Great Recession on employment and earnings outcomes for groups defined by year of birth over the ten years following the beginning of the recession. With the exception of the oldest workers, all groups experience reductions in earnings and employment due to local unemployment rate shocks during the recession. Younger workers experience the largest earnings losses in percent terms (up to 13 percent), in part because recession exposure makes them persistently less likely to work for high-paying employers even as their overall employment recovers more quickly than older workers'. Younger workers also experience reductions in earnings and employment due to changes in local labor market structure associated with the recession. These effects are substantially smaller in magnitude but more persistent than the effects of unemployment rate increases.
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Local and National Concentration Trends in Jobs and Sales: The Role of Structural Transformation
November 2023
Working Paper Number:
CES-23-59
National U.S. industrial concentration rose between 1992-2017. Simultaneously, the Herfindhahl Index of local (six-digit-NAICS by county) employment concentration fell. This divergence between national and local employment concentration is due to structural transformation. Both sales and employment concentration rose within industry-by-county cells. But activity shifted from concentrated Manufacturing towards relatively un-concentrated Services. A stronger between-sector shift in employment relative to sales explains the fall in local employment concentration. Had sectoral employment shares remained at their 1992 levels, average local employment concentration would have risen by 9% by 2017 rather than falling by 7%.
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Trade Liberalization and Labor-Market Outcomes: Evidence from US Matched Employer-Employee Data
September 2022
Working Paper Number:
CES-22-42
We use matched employer-employee data to examine outcomes among workers initially employed within and outside manufacturing after trade liberalization with China. We find that exposure to this shock operates predominantly through workers' counties (versus industries), that larger own industry and downstream exposure typically reduce relative earnings, and that greater upstream exposure often raises them. The latter is particularly important outside manufacturing: while we find substantial and persistent predicted declines in relative earnings among manufacturing workers, those outside manufacturing are generally predicted to experience relative earnings gains. Investigation of employment reactions indicates they account for a small share of the earnings effect.
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Every Breath You Take, Every Dollar You'll Make: The Long-Term Consequences of the Clean Air Act of 1970
September 2013
Working Paper Number:
CES-13-52
This paper examines the long-term impacts of in-utero and early childhood exposure to ambient air pollution on adult labor market outcomes. We take advantage of a new administrative data set that is uniquely suited for addressing this question because it combines information on individuals' quarterly earnings together with their counties and dates of birth. We use the sharp changes in ambient air pollution concentrations driven by the implementation of the 1970 Clean Air Act Amendments as a source of identifying variation, and we compare cohorts born in counties that experienced large changes in total suspended particulate (TSP) exposure to cohorts born in counties that had minimal or no changes. We nd a signi cant relationship between TSP exposure in the year of birth and adult labor market outcomes. A 10 unit decrease in TSP in the year of birth is associated with a 1 percent increase in annual earnings for workers aged 29-31. Most, but not all, of this effect is driven by an increase in labor force participation. In present value, the gains from being born into a county affected by the 1970 Clean Air Act amount to about $4,300 in lifetime income for the 1.5 million individuals born into
these counties each year.
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Understanding Criminal Record Penalties in the Labor Market
June 2025
Working Paper Number:
CES-25-39
This paper studies the earnings and employment penalties associated with a criminal record. Using a large-scale dataset linking criminal justice and employer-employee wage records, we estimate two-way fixed effects models that decompose earnings into worker's portable earnings potential and firm pay premia, both of which are allowed to shift after a worker acquires a record. We find that firm pay premia explain a small share of earnings gaps between workers with and without a record. There is little evidence of variable within-firm premia gaps either. Instead, components of workers' earnings potential that persist across firms explain the bulk of gaps. Conditional on earnings potential, workers with a record are also substantially less likely to be employed. Difference-in-differences estimates comparing workers' first conviction to workers charged but not convicted or charged later support these findings. The results suggest that criminal record penalties operate primarily by changing whether workers are employed and their earnings potential at every firm rather than increasing sorting into lower-paying jobs, although the bulk of gaps can be attributed to differences that existed prior to acquiring a record.
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Exploring the Hiring, Pay, and Trading Patterns of U.S. Firms: The Dominance of Multinationals Engaged in Related-Party Trade
December 2024
Working Paper Number:
CES-24-77
We link U.S. job records with both firm-level business register and customs records to construct a novel set of summary statistics and descriptive regressions that highlight the central role played by the small set of multinational firms (denoted RP XM firms) who engage in both importing and exporting with related parties in translating international trade shocks to shifts in labor demand. We find that RP XM firms 1) dominate trade volumes; 2) account for very disproportionate shares of national employment and payroll; 3) employ greater shares of workers in higher pay deciles; 4) disproportionately poach other firms' high paid workers; 5) offer higher raises to their existing workers. These hiring and pay patterns generally exist even among new RP XM firms, but strengthen with RP XM tenure, and continue to hold, albeit at smaller magnitudes, after conditioning on standard proxies for firm and worker productivity. Taken together, these findings reveal that RP XM status is a reliable proxy for the kind of firm that drives the initial labor market impacts of trade shocks, and that high paid workers are likely to be most directly exposed to such shocks.
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