Global Opportunity
Trade as Villain: Belief in the American Dream and Declining Support for Globalization
Cameron Ballard-Rosa, Judith Goldstein & Nita Rudra
Journal of Politics, forthcoming
Abstract:
Why has US commercial policy become increasingly politicized in the 21st century? We argue that this politicization reflects an interaction between elite rhetoric on unfair trade practices and American meritocratic values. As the 21st century progressed, elites increasingly argued that economic malaise was a result of predatory practices by US trading partners. This "trade is unfair" rhetoric resonated most strongly with meritocratic Americans, and in particular, individuals who not only believed in principles of market fairness but also worried about future economic prospects. To evaluate the argument that trade policy frames resonate differently among Americans, we draw upon data from several survey experiments as well as a large, original panel data set with repeat-observations of the same individual respondents. We find that individuals who are most tied to the myth of the classic "American Dream" are the most likely to respond to a frame blaming unfair trade for America's economic problems, and that this contributes to rising anti-globalization sentiment.
The Digital Welfare of Nations: New Measures of Welfare Gains and Inequality
Erik Brynjolfsson et al.
NBER Working Paper, September 2023
Abstract:
Digital goods can generate large benefits for consumers, but these benefits are largely unmeasured in the national accounts, including GDP and productivity. In this paper, we measure welfare gains from 10 popular digital goods across 13 countries by conducting large-scale incentivized online choice experiments on representative samples of nearly 40,000 people. We estimate that these goods -- many of which are free to users -- generate over $2.5 trillion in aggregate consumer welfare across these countries per year, which is roughly equivalent to 6% of their combined GDP. We find that lower-income individuals and lower-income countries obtain relatively larger welfare gains from these goods compared to higher-income individuals and countries. This suggests that digital goods may reduce inequality in welfare within and across countries by disproportionately benefiting lower-income groups.
Exposure to international trade lowers green voting and worsens environmental attitudes
Charlotte Bez et al.
Nature Climate Change, October 2023, Pages 1131-1135
Abstract:
From a political perspective, advancing green agendas in democracies requires obtaining electoral support for parties and candidates proposing green platforms. It is therefore crucial to understand the factors driving green voting and attitudes. Yet, limited research has explored the role of economic determinants in this context. In this study we show that globalization, through the distributional consequences of import competition, is an important determinant of support for parties proposing green platforms. Our analysis covers the United States and 15 countries of Western Europe, over the period 2000-2019, with trade exposure measured at the level of subnational geographic areas. We find that higher trade exposure leads to lower support for more environmentalist parties and to more sceptical attitudes about climate change. Our empirical findings are in line with the theoretical channel of deprioritization of environmental concerns, as trade-induced economic distress raises the salience of economic issues.
A Theory of Trade Policy Transitions
Renee Bowen, Lawrence Broz & Peter Rosendorff
NBER Working Paper, September 2023
Abstract:
Trade policy is set by domestic political bargaining between globalists and protectionists, representing owners of factors specific to export and import-competing sectors respectively. Consistent with the post-Civil War Era of Restriction, protectionists implement high tariffs when status quo tariffs are low. When status quo tariffs are high, reciprocal free trade combined with domestic transfers to protectionists are implemented, explaining the 1930s Era of Reciprocity with Redistribution. Consensus emerges for Retreat from free trade when imports are high and domestic transfers are low, suggesting that US protectionist turn in the late 2010s was in part due to low levels of social transfers.
Global Competition, Local Unions, and Political Representation: Disentangling Mechanisms
Michael Becher & Daniel Stegmueller
Duke University Working Paper, September 2023
Abstract:
While recent scholarship has demonstrated multiple political effects of international trade, less attention has been paid to unbundling the mechanisms through which import competition affects democratic politics. One mechanism, in theory, works through labor unions as domestic countervailing powers shaping legislative responses on compensation and trade votes. We assess the relevance of unions as a mediating variable in the US Congress. For identification, we leverage two distinct sources of exogenous variation, one instrument for import exposure and another for unionization, and combine them in a semiparametric estimator. We find that (i) import competition lowers district-level unionization, (ii) weaker unions lead to less legislative support for compensating economic losers and less opposition to trade deregulation, and (iii) the union mechanism represents a large fraction of the overall effect of import exposure on legislative votes. The results help explain weak compensation and further trade liberalization in the face of rising global competition.
Litigation for Sale: Private Firms and WTO Dispute Escalation
Ryan Brutger
American Political Science Review, forthcoming
Abstract:
This article presents a theory of lobbying by firms for trade liberalization, not through political contributions, but instead through contributions to the litigation process at the World Trade Organization (WTO). In this "litigation for sale" model, firms signal information about the strength and value of potential cases and the government selects cases based on firms' signals. Firms play a key role in monitoring and seeking enforcement of international trade law by signaling information and providing a bureaucratic subsidy, which increases a state's ability to pursue the removal of trade barriers and helps explain the high success rate for WTO complainants. The theory's implications are consistent with in-depth interviews with 38 trade experts and are tested through an analysis of WTO dispute initiation.
Cultural distance, firm boundaries, and global sourcing
Yuriy Gorodnichenko, Bohdan Kukharskyy & Gerard Roland
Journal of Development Economics, January 2024
Abstract:
Casual observation suggests that cultural differences play an important role in business transactions, yet systematic evidence on this relationship is scarce. This paper provides a novel investigation of the effect of cultural distance on multinational firms' decisions to integrate their cooperation partners into firm boundaries, rather than transact with independent companies at arm's-length. To guide our empirical analysis, we develop a simple theoretical model which suggests that (i) cultural distance between contracting parties decreases the relative attractiveness of integration, and (ii) this effect is mitigated in more productive firms. We test these predictions using extensive product-, industry-, and firm-level data. We find a robust negative relationship between cultural distance and the relative attractiveness of integration. In line with our theoretical predictions, we also find that the effect of cultural distance on firm boundaries is less pronounced the higher firm's productivity.