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Insuring Free Trade: Unemployment Insurance and Trade Policy

Published online by Cambridge University Press:  20 January 2017

Daniel Y. Kono
Daniel Y. Kono*
Affiliation:
University of California, Davis
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Abstract

Research shows that trade openness and high social spending go hand in hand, at least in wealthy democracies. It is not clear, however, exactly why this is so. Many scholars and policymakers argue that generous social spending facilitates trade liberalization, but there is no direct empirical support for this claim. This paper is the first to show directly that social spending promotes freer trade. Specifically, I show that U.S. state-level unemployment insurance makes Congress members significantly more likely to vote for freer trade. Since state unemployment insurance is exogenous to individual congressional votes, my analysis shows clearly that the former affects the latter. My results imply that social spending insures not only citizens but also open trade policies against hard economic times. They also highlight the importance of subnational policy choices to national policy outcomes.

Keywords

tradesocial spendingunemployment
Type
Research Article
Information
Business and Politics , Volume 13 , Issue 3: Special Issue: The Domestic Foundations of IPE: The U.S. Case in Current and Historical Perspective , October 2011 , pp. 1 - 29
Copyright
Copyright © V.K. Aggarwal 2011 and published under exclusive license to Cambridge University Press 

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