How do adverse economic shocks that impact workers in turn influence domestic political outcomes, such as the incidence of labor unrest and the responses of incumbent officeholders? We study this issue by examining the downturn in export performance in China between 2013-2015. We exploit detailed customs data and the variation they reveal about Chinese prefectures' underlying exposure to the global trade slowdown, in order to implement a shift-share instrumental variables strategy. Prefectures in China that experienced a more severe export slowdown witnessed a significant increase in incidents of labor strikes. This was accompanied by a heightened emphasis in such prefectures on upholding domestic stability, as evidenced from: (i) textual analysis measures we constructed from official annual work reports using machine-learning algorithms; and (ii) data we gathered on the allocation of local fiscal expenditures towards public security uses. The central government was subsequently more likely to replace the party secretary in prefectures that saw a high level of "excess strikes", above what could be predicted from the observed export slowdown, suggesting that local leaders were held to account on yardsticks related to political stability. These findings shed light on how authoritarian regimes in strong states respond to political challenges that arise following economic shocks.
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