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Why did the China shock hurt so much?

THE PEOPLE of Des Moines, Iowa, are no strangers to economic upheaval. When a wave of Japanese imports arrived in America in the 1980s, their city was one of the places most vulnerable to the new competition. In 1974, 4,500 of them worked at making farm machinery and equipment. As many again made tyres and inner tubes. By 1990 only a little over half of those jobs were left. Yet in the intervening 16 years thousands of new jobs had sprouted, in life insurance, building materials and the restaurant trade. In 1990 Des Moines’ unemployment rate was below 4%, less than the national average of 5.6%.Not everyone fared as well. Mary Kate Batistich and Timothy Bond, of Purdue University, have recently estimated that the “Japan shock” explains about one-fifth of the fall in African-Americans’ labour-force participation between 1970 and 1990. But Des Moines’ experience was typical. Kerwin Kofi Charles, Erik Hurst and Mariel Schwartz, of the University of Chicago, found that local declines in manufacturing employment in the 1980s were not associated with increases in local unemployment rates.
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