The Effect of Import Competition on Employment in Canada: Evidence from the ‘China Shock’

Abstract

A common view holds that increasing trade with emerging economies in recent decades has harmed the economic prospects of middle-class workers in Western countries like Canada. In this paper, we provide a quantitative assessment of the impact on Canadian employment of a recent shock to Canada’s import supply: the rapid rise of China as a manufacturing export superpower in the late 1990s and early 2000s. Using an instrumental variables strategy, we estimate that total job losses from rising Chinese import competition were on the order of 150 to 170 thousand over the 2001-2011 period. Manufacturing industries account for at least 105 thousand of these job losses. This amounts to 21 per cent of the total decline in manufacturing employment over the 2001-2011 period.

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