Imports of Plastic and Rubber Products from China: An Application of the Caliendo Dvorkin Parro Model

Caliendo, Dvorkin and Parro (2019) presents a dynamic structural general equilibrium model of trade that is very useful for analyzing the effects of trade shocks on employment and economic welfare in different sectors and U.S. states over time. In this paper, I provide a simple application of this very complex model. While the simulations in Caliendo et al. (2019) combine shocks to all Chinese manufacturing sectors, my simulation isolates the effects of productivity growth in a single sector, Plastics and Rubber Products in China, in order to illustrate how a shock in one sector spills over to sectors directly upstream and downstream and to the rest of the economy. I focus on labor transitions over the short and long run and the distribution of employment and welfare effects across U.S. states.