Tag: David Autor

Must-Read: Paul Krugman: Trade and Jobs: A Note

Posted on by Brad DeLong

Must-Read: Ah. I’ve been waiting for Paul Krugman to write up something like this…

I think that he is, of course, correct. The estimated effects of the China shock on individual regions and labor markets is solid. Their aggregating up is fatally flawed pre-2008…

Paul Krugman: Trade and Jobs: A Note: “Trade and jobs… The big story in the academia/policy space…

…Autor et al… estimated large losses from Chinese import penetration…. But… some conceptual issues… are important for interpreting the results…. I would begin by posing a counterfactual: what would U.S. employment look like if we had pursued policies such as Trump tariffs that prevented the large trade deficits in manufacturing we actually have?… A balanced expansion of imports and imports would have, to a first approximation, no effect on manufacturing value added, and an effect on employment only to the extent that import-competing industry is more labor-intensive than exports…. [So] what matters is the manufacturing trade deficit… $600 billion in 2014. How much manufacturing did that deficit displace?… About $360 billion…. 2 million jobs.

OK, what about the effect on overall employment?… If monetary and fiscal policy are used to achieve a target level of employment–as they generally were prior to the 2008 crisis–then a first cut at the impact on overall employment is zero. That is, trade deficits meant 2 million fewer manufacturing jobs and 2 million more in the service sector. Since 2008, of course, we’ve been in a liquidity trap, with the Fed either unable or unwilling to hit its targets and fiscal policy paralyzed by ideology, so trade deficits are in practice a major drag on overall employment…. So, how big a deal is displacement of 2 million manufacturing jobs? Not trivial…. But… absent the trade deficit… we would have roughly 11.5 percent of the work force in manufacturing, rather than the actual 10. Compare this with the realities of the past: more than 20 percent in manufacturing in the late 1970s, more than 25 percent in the 1960s….

Autor and various co-authors… do… a bottom-up approach…. The impact of the China shock on employment, wages, and so on at the regional level… beautiful work. But what they do next is to apply the implied coefficient from this analysis to the aggregate effects of the China shock. And that’s much more dubious–especially when, in the second paper, they purport to estimate the effects on overall employment. In general, you can’t do that: applying estimates of partial regional effects to the overall aggregate exposes you to huge possible fallacies of composition. And in this case the crucial issue is monetary and fiscal response. Up through 2007… [their results] should be seen as jobs shifted out of manufacturing to other sectors, not total job loss…

Must-read: Mark Muro: “Adjusting to Economic Shocks Tougher”

Posted on by Brad DeLong

Must-Read: I gotta go back and reread Blanchard and Katz on regional adjustment in the early 1992. How much of it is that adjustment is faster? How much of it is that the shock they study–to LA-sector aerospace employment–was different? How much of it is that back then aggregate demand policy was supportive of adjustment?

Mark Muro: Adjusting to Economic Shocks Tougher: “In the last six months a burst of new empirical work…

…much of it focused on the region-by-region aftermath of the Great Recession—is shredding key aspects of the standard view and suggesting a much tougher path to adjustment for people and places…. Joe Parilla and Amy Liu, David Autor, David Dorn, and Gordon Hanson focus on the ‘stunningly slow’ adjustment of exposed local labor markets to the ‘China shock’ and argue that the story challenges ‘much of the received empirical wisdom about how labor markets adjust to trade shocks.’

Autor and his colleagues do not see much evidence at all of a frictionless labor market in which the rapid mobility of workers across firms, industries, and regions guarantees rapid adjustment to new realities. Instead they see a series of slow-moving crises in particular metro areas. ‘Switching costs’ and other frictions inhibit workers’ ability to shift quickly to new, less-threatened firms or industries.  Many workers never recoup lost earnings and depend more on transfer payments. Little offsetting growth is detected in industries not exposed to the shock…

Must-Read: David Autor: The Limits of the Digital Revolution: Why Our Washing Machines Won’t Go to the Moon

Posted on by Brad DeLong

Must-Read: David Autor: The Limits of the Digital Revolution: Why Our Washing Machines Won’t Go to the Moon: “Much of what can be readily automated as repetitive information and tasks has been done…

…and the frontiers are elsewhere… into higher-level abstract reasoning and tasks that require some mixture of creativity, and intuition, and expertise, and also moving downward into jobs that require physical dexterity and some cognitive flexibility. It’s not that we’ve reached the limits of… computerisation… it’s just that that particular strand that has been so important has not completely played out but is not the frontier…. A lot of the computerisation has been most evident in the so-called ‘middle-skill activities’ and that process is to a substantial extent complete, but that means that it will move into other activities. Whether that’s worse or better depends very much on who you are…. It corresponds to rising productivity…. It has distributional consequences…. If you’re doing a job and all of a sudden a machine can do it cheaper, that’s almost never going to be a good thing for you. If you’re doing a job and a machine makes you more productive at doing that work, that’s almost always a good thing for you…