Income segregatioon and Chinese import penetration

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This paper examines the causal relationship between US local income segregation and Chinese import penetration. According to the Heckscher-Ohlin model, low-skilled workers in developed countries experience adverse economic effects due to import penetration from developing countries, implying that such penetration can lead to increased income segregation. To assess this relationship, data from UN Comtrade, US County Business Patterns, and Berkes and Gaetani (2023) were merged. A Two-Stage Least Squares (2SLS) model was then constructed using a shift-share instrumental variable (IV) derived from the UN Comtrade and US County Business Patterns data. The estimation results indicate that Chinese import penetration increases the level of local income segregation in the US. This paper contributes to our understanding of the economic distributional consequences of trade.