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| The Effects of Export Slowdown on Labor Markets and Household Behavior |
| PAN Yu, XU Yuan, XU Mingzhi, MA Hong
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School of Economics, Xiamen University;
Business School, Beijing Normal University;
Institute of New Structural Economics, Peking University;
School of Economics and Management, Tsinghua University |
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Abstract The 2008 global financial crisis triggered a prolonged stagnation in international trade. Weak global demand caused a slowdown in China's exports. Over the past few years, the average export growth rate was only 5%, representing a sharp decline of 20% compared to the pre-crisis period of 2001-2008. China, with the world's largest working-age population, depends critically on exports for job creation. Weak external demand and export slowdown thus pose major economic and social challenges.
This paper examines how export slowdown, driven by weak external demand, affects individuals and households. Using data from the China Family Panel Studies (CFPS) conducted by Peking University Institute of Social Studies Survey and trade data from the General Administration of Customs, we construct city-level export demand shocks to analyze the effects of export slowdown since 2012 on individuals' labor market performance, mental health, and households' economic decisions in China. We employ a shift-share instrumental variable to identify the causal effect. Specifically, to isolate the effects of export slowdown caused by weak external demand from those driven by other domestic factors, we first calculate the changes in exports of each six-digit HS product from the rest of the world (excluding China) to the rest of the world. These product-level demand shocks are then weighted by the initial export structure of each prefecture-level city, and used as an instrumental variable for city-level export shocks.
The empirical results reveal that export slowdown significantly reduces individual wages, increases unemployment among low-skilled workers, induces more individuals to engage in flexible jobs or exit the labor market, and worsens mental health. Moreover, the adverse effects of export slowdown are more pronounced among women, workers in tradable sectors, low-skilled laborers, older individuals, and those with lower occupational social recognition scores.At the household level, export slowdown leads to a significant decline in total household income. Additionally, when facing a negative income shock, households are more likely to reduce financial investments, increase borrowing, and delay debt repayment to smooth expenditures, with no significant change in saving.
Our findings offer valuable policy guidance for expanding high-standard opening-up and advancing high-quality economic development. Meanwhile, we also provide theoretical support and valuable insights for the government to address the increasingly prominent structural challenges in foreign trade. On one hand, it is essential to stabilize the foundation of foreign trade and foster new growth drivers. This includes improving export quality, optimizing export structures, and advancing trade digitization and green transformation to better align with new demands in global development. On the other hand Lastly, given that export slowdown may exacerbate household debt risks, it is advisable to establish a regular household financial monitoring system, and improve temporary social assistance programs.
This paper makes several key contributions to the literature. Firstly, in terms of research focus, this paper shifts the focus from trade liberalization to the underexplored effects of export slowdown following the post-2008 decline in global demand. Secondly, in terms of data, most existing studies on trade impacts rely on industry,region, or firm level data. In contrast, this paper utilizes micro-level individual and household data across multiple dimensions, providing a more comprehensive understanding of the direct effects of negative export shocks and their heterogeneity across different demographic groups. Thirdly, in terms of policy relevance, our findings that export slowdown significantly worsens labor market outcomes and mental health offer actionable insights for policymakers in designing measures to mitigate the adverse effects of negative export shocks. Finally, in terms of methodology, the use of a Bartik instrumental variable regression and extensive robustness checks addresses endogeneity concerns and strengthens the validity of the results.
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Received: 05 August 2024
Published: 02 October 2025
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