Trade Elasticities, Transport Costs, and Employment in U.S. Manufacturing

I update the estimates of the trade elasticity of substitution for specific manufacturing industries in Ahmad and Riker (2020) using post-pandemic data on industry profit margins from the 2022 Economic Census. Then I demonstrate how to use these elasticity estimates to simulate the U.S. employment effects of industry-specific changes in the international transport costs of imported final goods. The simulations indicate that a 20% increase in the international transport costs could increase U.S. employment in the manufacturing industries by up to 2.10% and by up to 4,953 workers, depending on the industry’s trade elasticity, import penetration rate, export share, initial employment level, and initial international transport costs.