Scenario: the Following Quote Describes China's Effect on World Labor

question 165

Multiple Choice

Scenario: The following quote describes China's effect on world labor markets.
China's emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in the US industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. (The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade by David H. Autor, David Born, and Gordon H. Hanson, Annual Review of Economics Vol.8:1-635, October 2016)
-Refer to the scenario above.Which of the following statements stands in contrast to the impact of trade with China experienced by some U.S.workers described in this quote?

• A) Many workers displaced because of NAFTA's passage soon found gainful employment.
• B) While U.S. manufacturing employment declined due partly to trade with China, trade with the United States has almost certainly been good for Chinese producers and consumers.
• C) In recent years (beginning in the 1990s), trade has had a much more important effect on wages in the states than was observed before the 1990s.
• D) Opening up an economy to trade clearly expands the pie, but some people might end up with a smaller piece than they used to have.

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