15
Next, the more import sensitive the worker’s industry the more likely it is that their
displacement is due to a surge in imports and, thus, the more likely that the worker is eligible for
the TAA program. Using trade data from the U.S. International Trade Commission and
production data from the Bureau of Economic Analysis, we construct the industry’s import
penetration ratio (Import Sensitivity) by dividing industry imports by domestic consumption, or
the value of the industry’s production less net exports.
18,19
We also construct a measure of the
industry’s intra-industry trade by dividing the minimum of the industry’s imports or exports over
one half of the sum of imports and exports in the industry. The propensity score estimation
includes squares of both terms and an interaction between the import sensitivity and intra-
industry trade variable in order to account for potential non-linearities in these measures.
As can be seen from Table 3, inclusion of these industry-level variables alone does an
excellent job of predicting participation in the TAA program; the pseudo R
2
of the probit
regression with these variables alone is 0.540, while the hit rate is 96.75 percent. However, it is
important to control for individual level characteristics to capture other determinants of the
decision to participate in the TAA program and, perhaps more importantly, the employment
outcome. The TAPR and CPS datasets include a number of variables that have traditionally been
used to explain employment outcomes, including the age of the individual, gender, and the level
of education. We also include the length of time the worker had been employed with the firm
from which he or she was displaced (Tenure) and the square of the tenure variable. Finally, we
include a dummy variable for those workers who were displaced from their jobs in the first year
18
We use 2003 import and production data. A BEA concordance was used to match the industry-level BEA
production data to the six-digit North American Industry Classification (NAICS) import and export data. Similarly,
the Current Population Survey concordance was used to match the NAICS-level import and production data to the
Census Industry Classification Codes.
19
Other studies of trade and job displacement, such as Kletzer (1998), measure trade sensitivity using import growth
rates. The results from specifications that measure import sensitivity using the growth in the industry’s imports are
not qualitatively different from those presented here and are available from the authors upon request.