Labour market outcomes of the China shock in Australia

Abstract

This paper examines the effect of the rise in Chinese import competition on the Australian labour market from 1991 to 2007. Using the data from the Australian Bureau of Statistics Labour Force Survey, I find three main results. First, the Chinese import competition generates net job gains for the economy at both aggregate and sectoral levels. The manufacturing and service sectors both experience a growth in employment due to the movements of workers between and within industries. Second, the job losses in manufacturing industries are accompanied by expansions in services industries. The Chinese import exposure reorganises the job allocations from manufacturing to services. Third, the industrial shifts and skill-biased technical change caused by the Chinese imports bring about job polarisation. Estimates show evidence of job concentration on low-skilled and high-skilled workers while also a weakening focus on middle-skilled occupations.