The China Effect on Colombia’s Manufacturing Labor Market

In this paper, I use Colombian data from 1996-2013 to construct two datasets that are used to assess whether the China Shock has affected the future growth rates of productivity, employment level, workforce composition, wages, export performance, and informal employment levels within Colombias manufacturing sector. Empirically, I use a two-stage estimation approach that instruments regional import market share in Colombia with exogenous regional export market shares in markets outside Latin America. The results validate that the China Shock has significant effects on future growth rates for employment, workforce composition, wages per employee, productivity, and domestic sales. While the current growth rate of export performance is affected by the China Shock, the future growth rates of export performance and informality are not.