China Shock Versus COVID ‐19 Pandemic: Which Matters More for Job Losses?

Studies have found that Chinese import competition (known as “China Shock”) and the COVID‐19 pandemic have caused a loss of jobs. Using state‐level panel data from 2017 to 2021, this paper finds that both Chinese import competition and COVID‐19 confirmed cases have had negative impacts on US manufacturing employment, but the impact of Chinese import competition has been larger. The findings are robust to additional controls and various specifications. The effects are heterogeneous by industry. Employment in the service sector has been significantly damaged by increasingly severe COVID‐19 but not directly affected by imports from China. By contrast, employment in labour‐intensive manufacturing industries has been more vulnerable to both Chinese import penetration and COVID‐19. The analysis finds heterogeneous impacts of the two factors in states with different economic conditions and reactions to the pandemic.