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Reciprocity and the China Shock

Author

Listed:
  • Chad P. Bown
  • Lorenzo Caliendo
  • Fernando Parro
  • Robert W. Staiger
  • Alan O. Sykes

Abstract

We formalize the GATT/WTO principle of reciprocity in workhorse quantitative trade models, characterizing reciprocal tariff cuts that hold terms of trade fixed and investigating their labor-market impacts. We provide closed-form expressions mapping reciprocal tariff cuts to labor market dislocation. We demonstrate that a country’s own tariff liberalization is a sufficient statistic for the labor-market adjustments it can expect from tariff negotiations that satisfy reciprocity. Applying our theoretical results to China’s 2001 WTO accession, we find that China’s tariff reductions exceeded reciprocity norms, increasing real incomes but amplifying the manufacturing employment dislocation – the China Shock – in the United States and globally.

Suggested Citation

  • Chad P. Bown & Lorenzo Caliendo & Fernando Parro & Robert W. Staiger & Alan O. Sykes, 2024. "Reciprocity and the China Shock," NBER Working Papers 32835, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32835
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    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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