Labor Market Shocks and the Demand for Trade Protection: Evidence from Online Surveys

39 Pages Posted: 1 Apr 2019

See all articles by Rafael Di Tella

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: March 2019

Abstract

We study preferences for government action in response to layoffs resulting from different types of labor-market shocks. We consider the following shocks: technological change, a demand shift, bad management, and three kinds of international outsourcing. Respondents are given a choice among no government action, compensatory transfers, and trade protection. In response to these shocks, support for government intervention generally rises sharply and is heavily biased towards trade protection. Demand for import protection increases significantly in all cases, except for the “bad management” shock. Trade shocks generate more demand for protectionism, and among trade shocks, outsourcing to a developing country elicits greater demand for protectionism than outsourcing to a developed country. The “bad management” shock is the only scenario that induces a desired increase in compensatory transfers. Effects appear to be heterogeneous across subgroups with different political preferences and education. Trump supporters are more protectionist than Clinton supporters, but preferences seem easy to manipulate: Clinton supporters primed with trade shocks are as protectionist as baseline Trump voters. Highlighting labor abuses in the exporting country increases the demand for trade protection by Clinton supporters but not Trump supporters.

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Suggested Citation

Di Tella, Rafael and Rodrik, Dani, Labor Market Shocks and the Demand for Trade Protection: Evidence from Online Surveys (March 2019). NBER Working Paper No. w25705. Available at SSRN: https://ssrn.com/abstract=3363443

Rafael Di Tella (Contact Author)

Harvard Business School - Business, Government and the International Economy Unit ( email )

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HOME PAGE: http://www.people.hbs.edu/rditella/

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Dani Rodrik

Harvard University - Harvard Kennedy School (HKS) ( email )

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Cambridge, MA 02138
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617-496-5747 (Fax)

HOME PAGE: http://www.ksg.harvard.edu/rodrik/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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