The China Shock’s Surprising Impact on Intergenerational Income Mobility

Import competition is known to cause lasting income losses for manufacturing workers, but its effects on their children have been largely overlooked. One might expect these losses to tie children's income more closely to their parents' income, since poorer parents have little to fall back on, while richer ones can keep investing in their children. Using matched employer-employee data that link children to their parents, I find the opposite: import competition from China increases intergenerational income mobility among children of Canadian manufacturing workers. In heavily exposed families, a child’s position in the income distribution depends about 20% less on where their parents stood. Children from poorer families climb the income ladder; they move out of their parents' industries into ones that offer similar pay on average but where family background matters less. Children from richer families fall; they stood to follow their parents into high-paying manufacturing industries, and the shock takes those jobs away.