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Can labour market institutions mitigate the China syndrome? Evidence from regional labour markets in Europe

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  • Jan‐luca Hennig

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper investigates how labour market regulations alter the adverse impact of rising import competition from China in European local labour markets between 1997 and 2006. The paper constructs measures of regional exposure to Chinese imports based on previous literature and on regional labour market frictions exploiting involuntary labour reallocations. Taking into account the endogeneity of import competition and its interaction with labour market regulations, the paper finds that regions more exposed to the rise of China have suffered from a reduction in manufacturing employment shares. This shock grows larger with regional labour market frictions; hence, it exacerbates the impact of trade shock on employment. Moreover, the paper finds that employment in public services, and not in construction or private services sector, absorbed the negative shock to the manufacturing sector. The unemployment rate, the labour force participation rate and wages in all sectors are unresponsive to import competition from China.

Suggested Citation

  • Jan‐luca Hennig, 2023. "Can labour market institutions mitigate the China syndrome? Evidence from regional labour markets in Europe," Post-Print hal-03856251, HAL.
    • Handle: RePEc:hal:journl:hal-03856251
    DOI: 10.1111/twec.13275
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03856251
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    References listed on IDEAS

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    Keywords

    empirical trade; employment structure; labour reallocation; regional labour markets;
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