Globalisation, government popularity, and the Great Skill Divide

Cevat Giray Aksoy, Sergei Guriev, Daniel Treisman 08 May 2018

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The politics of trade has recently dominated headlines. A US presidential election turned in large part on one candidate’s promise to get tough against imports from China and Mexico. Across Eastern Europe, populist leaders have taken stands against EU integration, and in the UK a majority recently voted to leave. Although anxiety about immigration and weakened sovereignty are common themes in the discontent, anger at the perceived loss of jobs to international competition is also highly salient.

Trade flows and politics

The attitudes toward globalisation have emerged as a new dimension of political alignment, alongside – or instead of – the traditional left-right redistribution axis. Yet, although some scholars have explored implications of classic trade theories for preferences on trade policy (Scheve and Slaughter 2001, O’Rourke and Sinnott 2001, Mayda and Rodrik 2005) until very recently, there has been little systematic empirical analysis of the links between global trade and mass politics. 

Three recent papers evaluate the impact of international trade on voting in the US. Margalit (2011) shows that job losses from import competition depressed the vote share of the incumbent president in 2004 and 2008. Jensen et al. (2017) also find that trade-related losses of manufacturing jobs cost incumbents votes. They show, in addition, that rising employment in high-skill export industries led to higher incumbent support. Autor et al. (2016) examine the polarisation of US politics and find that congressional districts exposed to greater increases in import penetration (due to the ‘China import shock’ following China’s accession to the WTO) disproportionately removed moderate politicians from office in the 2000s. Fewer papers have looked for political consequences of trade in a cross-national context (e.g. Colantone and Stanig, 2017 for Europe, and Margalit 2017 for 16 countries covered by two rounds of the ISSP survey).

Does the skill profile matter?

In a recent paper we hypothesise – following the Heckscher-Ohlin-inspired studies of policy preferences – that attitudes will depend on the interaction between an individual’s skill level and the skill-intensity of the country’s imports and exports (Aksoy et al. 2017). Empirically, we disaggregate individuals and trade flows on the basis of skill intensity. Reaching beyond self-reported attitudes towards trade, we study support for incumbent officials, which has a more direct connection to voting. At the same time, rather than assuming a particular pattern of trade flows based on countries’ factor endowments – a pattern known to be at best only partly accurate – we use a direct measure of actual flows. Our main hypothesis is that highly skilled workers are more likely to support the incumbent national leadership if skill-intensive imports are falling and skill-intensive exports are growing. 

Based on a unique data set from the Gallup World Poll including 118 countries and nearly 450,000 individuals over the last ten years, our results reveal a causal impact of trade patterns on approval of political leaders. (In order to identify causality, we use sea-to-air-distance instruments conventional in the recent trade literature). 

What the data say

As expected, we find that the interaction between individuals’ characteristics and their country’s trade structure matters. Highly skilled individuals approve of their government more when high-skill intensive exports increase, but approve of it less when high-skill intensive imports rise. High-skill intensive trade does not affect political approval among the unskilled. More generally, we find – contrary to the conventional wisdom – that unskilled workers do not oppose imports and blame their leaders for failing to protect markets, rather the reverse.

The effects do not appear to vary with age or gender. They are stronger for rural residents, who often have fewer alternatives when local firms are forced to close. We also find that outsourcing of jobs to the developing world may blunt the impact of openness on attitudes of the highly educated in recipient countries.  

The size of the effects is significant: each 10% increase in skill-intensive exports boosts political approval among skilled individuals by 1.2 percentage points. The respective number for skill-intensive imports is 1.7 percentage points. To illustrate, we estimate the total effects for countries with large changes in skill-intensive trade flows. Where skill intensive exports rose sharply (Bulgaria, Lithuania, Nigeria, and Slovakia), trade explains a quarter of the increase in political approval among highly skilled individuals. In countries with large increases in skill intensive imports (Chile, Paraguay, South Korea, and Turkey), trade explains from one half to two thirds of the fall in approval among the highly skilled. 

Implications

Our results have different implications for countries with different skill-intensity profiles of trade. By definition, not all countries can export more skill-intensive products than they import. As education levels rise, political approval should tend to increase in countries with faster growth of skill-intensive exports than imports – but to trend lower in other countries. However, the downside effects will generally be more than offset by the direct impact of education: highly skilled individuals tend to approve more of incumbent leaders and governments. 

References

Aksoy, C G, S M Guriev and D Treisman (2017), “Globalization, Government Popularity, and the Great Skill Divide”, CEPR Discussion Paper 12897.  

Autor, D, D Dorn, G Hanson and K Majlesi (2016), “Importing political polarization? the electoral consequences of rising trade exposure”, NBER Working Paper 22637. 

Colantone, I and P Stanig (2017), “The trade origins of economic nationalism: Import competition and voting behavior in western Europe”, Baffi Carefin Centre Research Paper 49.

Jensen, J B, D P Quinn and S Weymouth (2017), “Winners and losers in international trade: The effects on US presidential voting”, International Organization 71(3): 1-35. 

Margalit, Y (2011), “Costly jobs: Trade-related layoffs, government compensation, and voting in US elections”, American Political Science Review 105(1): 166-188. 

Margalit, Y (2017), “Commerce & Oppositions: The Political Responses of Globalization’s Losers”, mimeo, Stanford University.

Mayda, A M and D Rodrik (2005), “Why are some people (and countries) more protectionist than others?”, European Economic Review 49(6): 1393-1430.

O’Rourke, K H and R Sinnott (2001), “What determines attitudes towards protection? Some cross-country evidence”, in Brookings Trade Forum 2001, pp. 157-206.

Scheve, K F and M J Slaughter (2001), “What determines individual trade-policy preferences?”, Journal of International Economics 54(2): 267-292.

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Topics:  International trade Politics and economics

Tags:  globalisation, political alignment, anti-globalisation, highly skilled workers, imports

Principal Economist, European Bank for Reconstruction and Development; Research Affiliate at IZA & LSE

Chief Economist, European Bank for Reconstruction and Development; Professor of Economics (on leave), Sciences Po Paris; CEPR Research Fellow

Professor of Political Science, UCLA

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