November 29, 2016 | Commentary on Trade
In the aftermath of a presidential election that brought intense scrutiny to white, working-class voters in small towns, a new working paper in economics seeks to explain how at least two symptoms of social decline–suicide and substance abuse–relate to trade with China. The authors, Federal Reserve economist Justin R. Pierce and Peter K. Schott of the Yale School of Management, studied counties that were particularly exposed to trade competition from China after 2000.
China’s export boom accelerated after the country’s accession to the World Trade Organization in 2001–a year after it gained normal trade relations with the U.S.–significantly affecting the world economy. Many goods became cheaper, global poverty fell, and manufacturers in the developed world had to adapt to competition–rapidly–or close.
Mr. Pierce and Mr. Schott were curious whether the rise in mortality documented among middle-age white men could be attributed to sudden and persistent unemployment caused by expanded trade with China. They use counties’ relative exposure to competition from China to distinguish between those that experienced mostly benefits from cheaper imports and those that experienced substantial costs from manufacturing competition.
As it stands, most of the results of their work are muddy. They write that trade with China caused higher death rates from some causes in affected counties but also found lower death rates from other causes. For example, they found 0.42 more suicides per 100,000 people in high-exposure counties but also note that there were 2.69 fewer deaths from heart attacks. They do not report an overall mortality result.
One problem the authors face is that they cannot account for migration patterns. If trade with China causes job loss in some places and job growth in others, economists would expect people to move toward the opportunities. But those who move are not randomly selected: They are likely to be healthier, more employable, and more motivated than those who stay behind. Some of the outcomes that Mr. Pierce and Mr. Schott found may be the result of moving trucks, not shipping containers.
Overall mortality might have been better or worse in the absence of normalized trade with China; this research cannot tell us.
With so many statistically significant results–some seeming to contradict others–the paper is likely to be cited, and possibly abused, by people eager for statistics to back up their beliefs. More work is needed to resolve contradictions and address the question of selective migration before the findings are reliable and broadly applied.
First appeared on The Wall Street Journal Think Tank Blog.