Economic historian Joseph Francis describes a 2022 correction to the influential 'China shock' research design. He says the correction wiped out the estimated effects on wages and living standards, yet that result appeared only in an appendix.
…the same level of manufacturing. And what they found was that the effect on the manufacturing share of employment, once they introduced these new controls, fell by about half. It fell from about 0.6 to 0.3. I can't quite remember what the units of the coefficients are in. So it fell by about half.
…localized, which meaning it was very put in various places in the United States, which could suggest very powerful political changes were put in motion because a large group of people in a small area like a state were giving a big impact. And so it was still, it's half, but it's still a big impact.
Yeah, the period in all this is 1990 to 2007. So it ends in 2007. The 25%, 45% figure that's in the abstract, and I know that he said on your podcast as well, that's actually a different issue, which should probably come to later on to later. Their regressions can't actually produce that figure. And that was something else that I found independently of the Borussiac et al. corrections. Their corrections were to the kind of the raw regression coefficient, which is, I can't remember, I honestly can't remember what the units are. It's per thousand dollars of exposure to Chinese imports, something like that. And the effect fell by about half. And that meant that people looked at the Borussia Ketal article, which was 2022, and they said, okay. So they introduced some controls. The effect survived. So Arthur et al.'s research design survived. And as I was doing this long process of reviewing it, I was like, oh, yeah, okay, well, that's fair enough. But then eventually I had this kind of Eureka moment where I said, well, what…
So the reason this is important is that it's not surprising that if the United States is importing a lot more from China, that it's possible that it will take away manufacturing jobs in the United States. But there was another effect. And this, of course, when I interviewed David back in 2016…
I can only speculate on that, Russ. I think the way the academic publishing system works, especially in economics, young researchers, especially, are under a lot of pressure to get publications in top five economics journals. That's what they have to do to get tenure. And you might not want to…
cynical one, but it could be true.