Accounting

Internal medicine

International trade

Earnings

Demographic economics

Economic growth

Biology

Labour economics

Economy

Political science

China

Economics

Ecology

Wage

Human capital

Accession

Shock (circulatory)

European union

Tertiary sector of the economy

Low wage

Medicine

Competition (biology)

The Review of Economics and Statistics

Using employee-employer matched data, I analyze the impact of a low-wage trade shock on manufacturing workers in a high-wage country, Denmark, and how they adjust to the shock over a decade. I derive causal effects by exploiting the dismantling of the Multifiber Arrangement quotas on products from China upon its WTO accession as a quasi-natural experiment and use within-industry, within-occupation heterogeneity in workers’ exposure to this shock. I find significant negative long-run effects on earnings and employment trajectories and identify job instability in the service sector as a main adjustment friction, concentrated among workers with manufacturing-specific education and occupation. The results establish the importance of specific human capital in trade adjustment and provide evidence of skill upgrading as workers rebuild lost human capital through education.

Workers beneath the Floodgates: Low-Wage Import Competition and Workers’ Adjustment