Economic and Political Consequences of China’s Rise: Lessons from the China Shock
XII Rodolfo Debenedetti Lecture, Milan
3 May 2018
Room N08 (Velodromo) – Piazza Sraffa
Lecturer: David Autor (Massachusetts Institute of Technology)
Introduction: Carlo Altomonte (Università Bocconi)
Discussion: Italo Colantone (Università Bocconi)
David Autor, Ford Professor of Economics and Associate Head, MIT Department of Economics, will hold the XII Rodolfo Debenedetti Lecture about “The economic and political consequences of China’s rise”.
Economists have long recognized that free trade has the potential to raise countries’ living standards. But what applies to a country as a whole need not apply to all its citizens. Workers displaced by trade cannot change jobs costlessly, and by reshaping skill demands, trade integration is likely to be permanently harmful to some workers and permanently beneficial to others. Until recently, economists were sanguine about the limited practical relevance of theoretical implications for workers in developed countries. China’s rise over the past decades offers a rare opportunity to study the labor market impacts of a large trade shock in developed economies.
Evidence from the “China Shock”—denoting China’s rapid market integration in the 1990s and its accession to the World Trade Organization in 2001—has given new, unwelcome empirical relevance to these longstanding theoretical insights. China’s rapid rise, while enormously positive for world welfare, has created identifiable losers in trade-impacted industries and the labor markets in which they are located. These impacts include adverse distributional costs, which have long been recognized by canonical theory, and labor market adjustment costs, which the literature has typically downplayed. While this emerging body of evidence does not refute the long-held view that trade increases aggregate welfare or national incomes—indeed, China’s meteoric rise from endemic poverty to burgeoning prosperity bears testimony to the potential of trade to deliver rising living standards—it makes clear that trade has both significant benefits and substantial costs.
Trade integration offers profound gains for all nations. Reaping them is a worthy policy goal. Yet an appreciation for the concentrated costs trade adjustment imposes on a subset of citizens should caution policymakers to proceed towards that goal with due care.
David Autor, one of the leading labor economists in the world and a member of the American Academy of Arts and Sciences, is Ford Professor of Economics and associate department head of the Massachusetts Institute of Technology Department of Economics. He is also Faculty Research Associate of the National Bureau of Economic Research, Research Affiliate of the Abdul Jameel Latin Poverty Action Lab, Co-director of the MIT School Effectiveness and Inequality Initiative, Director of the NBER Disability Research Center and former editor in chief of the Journal of Economic Perspectives. He is an elected officer of the American Economic Association and the Society of Labor Economists and a fellow of the Econometric Society.
Autor’s work focuses on earnings inequality, employment and feedback between labor market opportunities, household structure and the social/intellectual development of children. He has published extensively in many major academic journals in economics.