Facing the challenge of globalization: the role of confidence in institutions

An extensive debate on the determinants of people's support for globalization concluded that it is necessary to leverage on welfare schemes to compensate those who lose from globalization. Yet, this solution is not universally accepted and it may not be viable in times of budget constraints. We test the hypothesis that confidence in institutions improves people's acceptance of globalization. We use micro data from the Eurobarometer, the European Social Survey and the European Quality of Life Survey to study the case of Luxembourg, a small and open economy, highly integrated in international markets and in which immigrants are more than half of the total residents. Figures indicate that confidence in institutions, and in particular in international ones, increases people's acceptance of globalization. However, when globalization is considered as free movement of people across borders, confidence in international institutions plays a major role. These results are robust to reverse causality.