DP15186 The Heterogeneous Effects of Trade across Occupations: A Test of the Stolper-Samuelson Theorem

Author(s): Sergi Basco, Maxime Liegey, Martí Mestieri, Gabriel Smagghue
Publication Date: August 2020
Date Revised: December 2020
Keyword(s): inequality, Stolper-Samuelson
JEL(s): F11, F14, F16
Programme Areas: International Trade and Regional Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15186

This paper develops and implements a novel test of the Stolper-Samuelson theorem. We use nationally-representative matched employer-employee panel data from 1997 through 2015 to study the effect of the rise in China's exports on French worker earnings. Our version of the Stolper-Samuelson theorem states that there is a negative correlation between occupation exposure to Chinese competition and change in worker earnings. First, we document substantial heterogeneity in trade adjustment across occupations. Then, consistent with the Stolper-Samuelson prediction, we show that workers initially employed in occupations more intensively used in hard-hit industries experience larger declines in earnings. We also show that workers tend to move out of hard-hit industries, but they tend to remain in their initial occupation