The China Syndrome Revisited: Impact of Technological Intensity and Chinese Import Penetration on Labor Market Outcomes in the EU

This paper contributes to research on the factors that have led to the decline of manufacturing employment in advanced economies by studying the impact of both import penetration and technological intensity on manufacturing employment between 2008 and 2018 using an extensive industry-level dataset for 28 EU countries. The findings make it clear that the growing share of Chinese imports in total extra-EU-28 imports significantly explains the declining trend in EU sectoral employment. The mentioned trend is shown to be mainly driven by the import penetration of Chinese consumer goods and less by the outsourcing of intermediate products. Yet, little evidence is found of technological intensity having a detrimental impact on sectoral employment outcomes. While the correlation between business expenditure on research and development per employee and employment growth was weakly negative, the share of information and communication technologies assets in total assets was positively correlated with both aggregate employment growth and the share of unskilled workers in the sector.