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Impacts of Trade on Wage Inequality across the United States: Analysis Using Matched Employer-Employee Data

  • Author(s): Cooke, Abigail Montague
  • Advisor(s): Rigby, David L
  • et al.
Abstract

The research presented in this dissertation examines the impacts of trade from low-wage countries on U.S. labor markets. Analysis explores how imports from low-wage countries influence the wages of workers with high- and low-levels of education and how such trade may be related to growing wage inequality. Linkages between import competition and low-wage imports at the national level are extended to individual census regions to provide some of the first sub-national data linking trade and wage inequality. Standard models of trade impacts by education-skill categories also are extended to capture the influence of task-based characteristics of work. Finally, the effects of import competition from low-wage countries on the likelihood of plant closure are examined. Engaging with the most recent theoretical models of trade, the empirical analysis presented in this dissertation uses detailed microdata from the U.S. Census Bureau. Those data are used to link individual workers to manufacturing plants and firms. The resulting employer-employee files are appended with data on the task characteristics of different occupations and with measures of import competition built-up from individual trade transaction data. The result is one of the most comprehensive datasets yet built connecting measures of trade to the characteristics of jobs, workers and business establishments spanning the years 1992-2007. Analysis of these data yields insights into the socially and spatially uneven consequences of trade. This dissertation finds that low-wage import competition is significantly related to increased inequality, driving down wages for workers with low levels of formal education and driving up wages for workers with high levels of education. The results indicate that import competition increases the nonproduction worker share of total wages within establishments, another measure of wage inequality related to differences in worker skills/education. It also reveals that the relationship between wage inequality and low-wage import competition varies substantially across U.S. regions. Furthermore, this dissertation finds that task intensity measures of routineness, complexity, and interpersonal interaction in a worker's occupation significantly mediate the effect of low-wage import competition on workers' wages. It also finds that low-wage import competition significantly raises the likelihood of manufacturing plant closure.

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