Imports, Exports, and Employment: India’s Trading Relationship with China

This paper examines the effect of increased import competition and export demand on local labor markets in the context of India’s trading relationship with China. Using an instrumental variables approach, I find that labor markets exposed to Chinese imports decrease their manufacturing employment growth relative to their positive pre-existing trend. On average, manufacturing employment does not grow in response to export demand shocks, but sufficiently literate, developed, or urban labor markets see positive manufacturing growth in response to export demand increases. These same districts are also able to increase their service sector employment in response to increased export demand.