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Magnification of the ‘China Shock’ Through the U.S. Housing Market

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  • Yuan Xu
  • Hong Ma
  • Robert C. Feenstra

Abstract

The ‘China shock’ operated in part through the housing market, which is one reason why its impact was so large in the United States. We add housing to a multi-region monopolistic competition model, with individuals choosing whether and where to work. Controlling for housing reduces the negative coefficient of import exposure on manufacturing employment by 20-25%, with a significant indirect magnification through the housing market. Combining manufacturing and construction employment, the indirect effect of the China shock through the housing market explains one-fifth as much of the variance in employment as the direct effect of import exposure, with further employment impacts through independent fluctuations in the housing market.

Suggested Citation

  • Yuan Xu & Hong Ma & Robert C. Feenstra, 2019. "Magnification of the ‘China Shock’ Through the U.S. Housing Market," NBER Working Papers 26432, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26432
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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