Worker Adaptation to Import Shocks and its Consequences: German Evidence for Workers

Abstract

We examine how import exposure affected German workers’ regional mobility, job switching and wages between 2000 and 2011. Using a novel measure of regional-level import exposure that groups workers with similar occupational characteristics into business functions (management, marketing, R&D, and fabrication), we first explore worker-level adjustments through regional mobility and business function switching. In the second step, we quantify the wage consequences of imports-induced adaptation. We use trade data from the World Input-Output Database and employment data for 96 local labour markets from the German Federal Employment Agency. We combine these data with worker-level data from the Sample of Integrated Labor Market Biographies. Our findings suggest that larger import shocks make workers more likely to move to another region and switch to a different business function. In the most exposed regions, the probability that fabrication workers move to another region more than doubles compared to the baseline probability. We find that highly exposed workers who move to another region and/or switch from one function to another experience higher wages compared to otherwise similar workers who stay put.