Instrumental Variables and Causal Mechanisms: Unpacking the Effect of Trade on Workers and Voters

94 Pages Posted: 21 Feb 2018

See all articles by Christian Dippel

Christian Dippel

University of California, Los Angeles (UCLA) - Anderson School of Management

Robert Gold

Kiel Institute for the World Economy

Stephan Heblich

University of Bristol - Department of Economics

Rodrigo R. Pinto

University of Chicago - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 17, 2018

Abstract

This paper shows that import exposure affects voting behavior because it affects local labor markets. We develop a new framework for mediation analysis where one instrumental variable is sufficient to identify three causal effects. Using German data from 1987–2009, we find that import exposure increases the support of nationalist parties and causes labor market turmoil. The voting response to import exposure can entirely be explained by the labor market adjustments to import exposure. Individual-level data corroborate our findings. Our novel estimation framework is applicable to a broad range of empirical studies interested in the causal mechanisms behind causal effects.

Keywords: instrumental variables, causal mediation analysis, import exposure, voting, local labor markets

JEL Classification: C360, D720, F600, J200

Suggested Citation

Dippel, Christian and Gold, Robert and Heblich, Stephan and Pinto, Rodrigo R., Instrumental Variables and Causal Mechanisms: Unpacking the Effect of Trade on Workers and Voters (January 17, 2018). CESifo Working Paper Series No. 6816, Available at SSRN: https://ssrn.com/abstract=3126664

Christian Dippel

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Robert Gold (Contact Author)

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Stephan Heblich

University of Bristol - Department of Economics ( email )

8 Woodland Road
Bristol BS8 ITN
United Kingdom

Rodrigo R. Pinto

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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