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Local Economic and Political Effects of Trade Deals: Evidence from NAFTA

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  • Jiwon Choi
  • Ilyana Kuziemko
  • Ebonya Washington
  • Gavin Wright

Abstract

Why have white, less-educated voters left the Democratic Party? We highlight the role of the 1994 North American Free Trade Agreement (NAFTA). In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses after its implementation. Voters in these counties (and protectionist voters regardless of geography) turned away from the party of President Clinton, who promoted the agreement. This shift is larger for whites (especially men and those without a college degree) and social conservatives, suggesting that racial identity and social-issue positions mediate reactions to economic policies.

Suggested Citation

  • Jiwon Choi & Ilyana Kuziemko & Ebonya Washington & Gavin Wright, 2024. "Local Economic and Political Effects of Trade Deals: Evidence from NAFTA," American Economic Review, American Economic Association, vol. 114(6), pages 1540-1575, June.
    • Handle: RePEc:aea:aecrev:v:114:y:2024:i:6:p:1540-75
    DOI: 10.1257/aer.20220425
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    Cited by:

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    2. Suzanne Mettler & Trevor Brown, 2022. "The Growing Rural-Urban Political Divide and Democratic Vulnerability," The ANNALS of the American Academy of Political and Social Science, , vol. 699(1), pages 130-142, January.
    3. Dorn, David & Levell, Peter, 2021. "Trade and Inequality in Europe and the US," CEPR Discussion Papers 16780, C.E.P.R. Discussion Papers.
    4. Natkhov, Timur & Pyle, William, 2023. "Revealed in transition: The political effect of planning's legacy," European Economic Review, Elsevier, vol. 159(C).
    5. Brey, Björn, 2024. "The effect of recent technological change on US immigration policy," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    6. Blanchard, Emily J. & Bown, Chad P. & Chor, Davin, 2024. "Did Trump’s trade war impact the 2018 election?," Journal of International Economics, Elsevier, vol. 148(C).
    7. Natkhov, Timur & Pyle, William, 2022. "Revealed in transition : The political effect of planning’s legacy," BOFIT Discussion Papers 12/2022, Bank of Finland, Institute for Economies in Transition.
    8. repec:zbw:bofitp:2022_012 is not listed on IDEAS
    9. Ilyana Kuziemko & Nicolas Longuet-Marx & Suresh Naidu, 2024. "“Compensate the Losers?†Economic Policy and Partisan Realignment in the US," Working Papers 321, Princeton University, Department of Economics, Center for Economic Policy Studies..

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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