DP12897 Globalization, Government Popularity, and the Great Skill Divide

Author(s): Cevat Giray Aksoy, Sergei Guriev, Daniel Treisman
Publication Date: April 2018
Date Revised: September 2018
Keyword(s): International Trade, political approval, Political Polarization, skill intensity of trade
JEL(s): D72, F14, G02, P16
Programme Areas: Public Economics, International Trade and Regional Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12897

How does international trade affect the popularity of governments and leaders? We provide the first large-scale, systematic evidence that the divide between skilled and unskilled workers worldwide is producing corresponding differences in the response of political preferences to trade shocks. Using a unique data set including 118 countries and nearly 450,000 individuals, we find that growth in high skill intensive exports (of goods and services) increases approval of the leader and incumbent government among skilled individuals. Growth in high skill intensive imports has the opposite effect. High skill intensive trade has no such effect among the unskilled. To identify exogenous variation in international trade, we exploit the time-varying effects of air and sea distances on bilateral trade flows. Our findings suggest that the political effects of international trade differ with skill intensity and that skilled individuals respond differently from their unskilled counterparts to trade shocks.