Hostname: page-component-cd9895bd7-p9bg8 Total loading time: 0 Render date: 2024-12-28T21:08:36.040Z Has data issue: false hasContentIssue false
  • English
  • Français

Who Rides the Storm? Political Institutions and Trade Adjustment

Published online by Cambridge University Press:  20 January 2017

Daniel Y. Kono  and
Greg Love
Daniel Y. Kono
Affiliation:
University of California, Davis
Greg Love
Affiliation:
University of California, Davis
Get access Rights & Permissions [Opens in a new window]

Abstract

Both policymakers and scholars have expressed concern that trade has increased inequality in advanced industrialized countries (AICs). We argue that the impact of trade on inequality depends on the availability of public goods, such as educational opportunities, that allow displaced workers to upgrade their skills and adjust to trade. The provision of public goods, in turn, depends on political institutions: institutions that unify budgetary powers promote public-good spending while institutions that separate budgetary powers discourage it. Trade should thus increase inequality more (reduce inequality less) in countries with a high separation of budgetary powers. We test and find support for these hypotheses with a cross-sectional time-series analysis of fourteen AICs. Our results imply that trade can improve aggregate welfare without worsening economic inequities, but only if governments adopt complementary policies that facilitate human capital formation and labor-market adjustment.

Keywords

tradeinequalitypolitical institutions
Type
Article
Information
Business and Politics , Volume 9 , Issue 1 , April 2007 , pp. 1 - 26
Copyright
Copyright © V.K. Aggarwal 2007 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ball, Richard, and Chernova, Kateryna. 2005. “Absolute Income, Relative Income, and Happiness.” Working Paper.Google Scholar
Baron, David P. and Ferejohn, John A. 1989. “Bargaining in Legislatures.” American Political Science Review 83: 1181–1206.Google Scholar
Benoit, Emile. 1973. Defense and Economic Growth in Developing Countries. Lexington, MA: Lexington Books.Google Scholar
Bewley, R.A. 1979. “The Direct Estimation of the Equilibrium Response in a Linear Model.” Economic Letters 3: 357–361.Google Scholar
Bradley, David, Huber, Evelyne, Moller, Stephanie, Nielsen, François, and Stephens, John D. 2003. “Distribution and Redistribution in Postindustrial Democracies.” World Politics 55 (2): 193–228.CrossRefGoogle Scholar
Council of Economic Advisers. 2000. Economic Report of the President 2000. Washington, DC: United States Government Printing Office.Google Scholar
Cutler, David M. 1995) “The Cost and Financing of Health Care.” American Economic Review 85 (2): 32–37.Google ScholarPubMed
Cutler, David M. and Madrian, Brigitte C. 1995. “Labor Market Responses to Rising Health Insurance Costs.” Mimeo, Harvard University.Google Scholar
De Boef, Suzanna and Keele, Luke. 2006. “Taking Time Seriously: Dynamic Regression Models.” Working Paper.Google Scholar
Firebaugh, Glenn and Tach, Laura. 2005. “Relative Income and Happiness: Are Americans on a Hedonic Treadmill?” Working Paper.Google Scholar
Gleditsch, Kristian S. 2002. “Expanded Trade and GDP Data.” Journal of Conflict Resolution 46: 712–724.CrossRefGoogle Scholar
Grossman, Gene M. and Helpman, Elhanan. 1990. “Trade, Innovation, and Growth.” American Economic Review 80 (2): 86–91.Google Scholar
Hiscox, Michael J. 2001. International Trade and Political Conflict: Commerce, Coalitions, and Mobility. Princeton: Princeton University Press.Google Scholar
Huber, Evelyne, Ragin, Charles, and Stephens, John D. 2004. “Comparative Welfare States Data Set.”Google Scholar
Kam, Cindy D. and Franzese, Robert J. 2007. Modeling and Interpreting Interactive Hypotheses in Regression Analysis: A Brief Refresher and Some Practical Advice. Ann Arbor, MI: University of Michigan Press.Google Scholar
Keefer, Philip and Knack, Stephen. 2002. “Polarization, Politics and Property Rights: Links between Inequality and Growth.” Public Choice 111: 127–154.Google Scholar
Lohmann, Susanne and O'Halloran, Sharyn. 1994. “Divided Government and U.S. Trade Policy: Theory and Evidence.” International Organization 48 (4): 595–632.Google Scholar
Lopez, Humberto. 2004. “Pro Growth, Pro Poor: Is There A Trade-Off?” World Bank Policy Research Working Paper 3378.Google Scholar
Lienert, Ian. 2005. “Who Controls the Budget: The Legislature or the Executive?” Working Paper. Washington, D.C.: International Monetary Fund.Google Scholar
Madrian, Brigitte C. 1994. “Health Insurance and Labor Mobility: Is There Evidence of Job Lock?” Quarterly Journal of Economics 109 (1): 27–54.Google Scholar
Magee, Stephen P. 1980. ”Three Simple Tests of the Stolper-Samuelson Theorem.” In Issues in International Economics, edited by Oppenheimer, Peter. London: Oriel Press, 138–153.Google Scholar
Mahler, Vincent A. 2004. “Economic Globalization, Domestic Politics, and Income Inequality in the Developed Countries.” Comparative Political Studies 37 (9): 1025–1053.Google Scholar
McCubbins, Mathew D. and Thies, Michael F. 1997. “As a Matter of Factions: The Budgetary Implications of Shifting Factional Control in Japan's LDP.” Legislative Studies Quarterly 22 (3): 293–328.CrossRefGoogle Scholar
Milanovic, Branko. 2004. “Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys.” Working Paper. Washington, D.C.: World Bank.Google Scholar
Moene, Karl Ove and Wallerstein, Michael. 2001. “Inequality, Social Insurance, and Redistribution.” American Political Science Review 95 (4): 859–874.Google Scholar
Persson, Torsten, Roland, Gerard, and Tabellini, Guido. 2000. “Comparative Politics and Public Finance.” Journal of Political Economy 108 (6): 1121–1161.Google Scholar
Pontusson, Jonas and Rueda, David. 2005. “The Politics of Inequality and Partisan Polarization in OECD Countries.” Paper presented at the annual meeting of the American Political Science Association, Washington, D.C.Google Scholar
Pontusson, Jonas, Rueda, David, and Way, Christopher R. 2002. “Comparative Political Economy of Wage Distribution: The Role of Partisanship and Labour Market Institutions.” British Journal of Political Science 32: 281–308.Google Scholar
Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, DC: Institute for International Economics.Google Scholar
Rudra, Nita. 2004. “Openness, Welfare Spending, and Inequality in the Developing World.” International Studies Quarterly 48: 683–709.Google Scholar
Rueda, David and Pontusson, Jonas. 2000. “Wage Inequality and Varieties of Capitalism.” World Politics 52 (3): 350–383.Google Scholar
Stiglitz, Joseph E. 2002. Globalization and its Discontents. New York: W.W. Norton.Google Scholar
Stolper, Wolfgang F. and Samuelson, Paul A. 1941. “Protection and Real Wages.” The Review of Economic Studies 9 (1): 58–73.Google Scholar