The Impact of the China Shock on Employment Levels in Central Europe

Sammanfattning: The coexisting rise of China and Central European economies in the early 2000s as respectively the “Factory of the World” and the “Factory of Europe” raises the question whether Central Europe has either benefited from, or been harmed by the rise of China. This thesis therefore investigates the impact of the China shock on employment levels in Central Europe between 2000 and 2014. Using the WIOD 2016, it follows the proposition by Feenstra and Sasahara (2017) and quantifies the “net employment effect” of the China shock in Central European countries. In doing so, it compares the (positive) job impact of increased exports to China with the (negative) job impact of increased Chinese import penetration. Results show that increased bilateral trade with China between 2000 and 2014, has had a heterogeneous impact across Central European countries, where The Czech Republic and Slovakia see a net rise in employment levels, whereas Hungary, Poland and Slovenia experience a net demand reduction in jobs. Heterogeneity in net effects is on the export side caused by cross-country differences in export-openness and industry specialization, and on the import-side by differences in import-openness, initial domestic trade volumes and industry specialization.