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

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  • Rafael Di Tella
  • Dani Rodrik

Abstract

We study preferences for government action in response to layoffs resulting from different types of labour-market shocks. We consider: technological change, a demand shift, bad management and three kinds of international outsourcing. Support for government intervention rises sharply in response to shocks and is heavily biased towards trade protection. Trade shocks generate more demand for protectionism and, among trade shocks, outsourcing to a developing country elicits greater demand for protectionism. The 'bad management' shock is the only scenario that induces a desired increase in compensatory transfers. 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 labour abuses in the exporting country increases the demand for trade protection by Clinton supporters but not Trump supporters.

Suggested Citation

  • Rafael Di Tella & Dani Rodrik, 2020. "Labour Market Shocks and the Demand for Trade Protection: Evidence from Online Surveys," The Economic Journal, Royal Economic Society, vol. 130(628), pages 1008-1030.
    • Handle: RePEc:oup:econjl:v:130:y:2020:i:628:p:1008-1030.
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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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