Rising import competition from emerging countries such as China, which are increasingly integrated in the global economy, have led to lower labor market opportunities in many high-income countries, especially for middle-class manufacturing workers (see Keller and Utar, 2019). This article shows that the implications of rising import competition go beyond the labor market and also affect family size and structure.

For many countries, the 20th century will reflect a history of equalization of women’s and men’s opportunities in the labor market. With regards to labor force participation in the U.S., for example, shortly after World War II, men were almost three times as likely to be in the labor force as women, whereas by the year 2008 women’s labor force participation stood at about 83 percent of men’s, as Figure 1 (top) shows.

Figure 1: Women’s Labor Force Participation; Age of First-Time Motherhood

We have combined administrative data on all firms and their workers with complete family histories from population registers. This allows us to follow workers from job to job (or unemployment) as they make key family decisions on co-habitation, marriage, divorce, and children. The impact of the negative labor shock is found by comparing labor market and family experiences of workers employed at Danish firms that are hit hard by rising import competition from China with the experiences of workers who are much less affected. Figure 2 shows the impact on labor earnings between 2002 to 2007 for four sets of workers, women and men who are either young or old (fertile-age and post-fertile-age, respectively).

Figure 2: The Missing Earnings of Fertile-Age Women

Rather, fertile age women who experience diminished labor market opportunities because of the import competition from China turn towards family life, while men focus more on finding a new career path in the labor market. Figure 4 shows that import competition from China raises the likelihood of marriage for women, while the same is not true for men.

Figure 5 shows that women respond to rising import competition by having more children. The same is not true for men, however. Women in Denmark can respond to a negative labor demand shock by having more children, in part because the country has substantial insurance and transfer policies ensuring that losses in personal income are limited despite the decline in earnings.

Figure 5: Impact of Exposure to Rising Import Competition on Child Birth