NBER has a new paper by Autor (our lord and saviour), Dorn and Hanson:

Abstract:

China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.

The paper has three important take-aways:

• Surprisingly, it looks possible that low-income workers never recover from trade shocks.
• Social security benefits increase by much more than TAA benefits following trade shocks, indicating that TAA benefits ought to be dramatically expanded.
• On a more positive note, it's possible that the U.S.'s growing current account deficit during the period in study retarded specialisation into areas where the U.S. has an advantage over China.

Krugman changed economics's opinion from "Free trade is good always", to "Free trade is good 99pc of the time". Autor has now offered evidence for moving that position more firmly in the direction of "Free trade is good 99pc of the time for 75pc of the labour market".