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Trade and Welfare Compensation: The Missing Links

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  • Eunyoung Ha
  • Dong-Wook Lee
  • Puspa Amri

Abstract

This study uses theory from embedded liberalism to reorient the debate over efficiency versus compensation in the trade and welfare literature. We detail the causal mechanisms and provide empirical results that show how welfare spending can be a necessary condition to further trade liberalization. We argue that increases in welfare compensation lead to stronger public support for trade, which allows states to further advance along the path toward trade liberalization. Based on the 1995 and 2003 ISSP (International Social Survey Program) for 10 OECD countries, our multilevel statistical analyses (individual and country level) show that (1) workers in import-exposed sectors tend to strongly oppose trade, but this effect is substantially diminished when they receive unemployment compensation, and (2) public support for free trade is significantly associated with higher levels of trade openness.

Suggested Citation

  • Eunyoung Ha & Dong-Wook Lee & Puspa Amri, 2014. "Trade and Welfare Compensation: The Missing Links," International Interactions, Taylor & Francis Journals, vol. 40(5), pages 631-656, October.
    • Handle: RePEc:taf:ginixx:v:40:y:2014:i:5:p:631-656
    DOI: 10.1080/03050629.2014.896799
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    3. Lori G. Kletzer & Robert E. Litan, 2001. "A Prescription to Relieve Worker Anxiety," Policy Briefs PB01-02, Peterson Institute for International Economics.
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    5. William R. Cline, 1997. "Trade and Income Distribution," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 58, January.
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    Cited by:

    1. Buendía, Luis & Barredo, Juan & Balay, Juan, 2022. "Foreign sector and welfare state in Sweden: From complementarity to tensions," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 310-319.
    2. Federico Podestà, 2016. "Do Big Governments Promote Trade Liberalization? A Long-Term Analysis of 18 OECD Countries, 1975-2000," FBK-IRVAPP Working Papers 2016-02, Research Institute for the Evaluation of Public Policies (IRVAPP), Bruno Kessler Foundation.

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