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Public Finance and Individual Preferences over Globalization Strategies

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  • Gordon H. Hanson
  • Kenneth F. Scheve
  • Matthew Slaughter

Abstract

In the absence of distortionary tax and spending policies, freer immigration and trade for a country would often be supported by similar groups thanks to similar impacts on labor income. But government policies that redistribute income may alter the distributional politics. In particular, immigrants may pay taxes and receive public services. Imports, obviously, can do neither of these. This suggests quite different political coalitions may organize around trade and immigration. In this paper we develop a framework for examining how pre-tax and post-tax cleavages may differ across globalization strategies and also fiscal jurisdictions. We then apply this framework to the case of individual immigration and trade preferences across U.S. states. We have two main findings. First, high exposure to immigrant fiscal pressures reduces support for freer immigration among natives, especially the more-skilled. Second, there is no public-finance variation in opinion over trade policy, consistent with the data that U.S. trade policy has negligible fiscal-policy impacts. Public-finance concerns appear to be crucial in shaping opinions towards alternative globalization strategies.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11028.

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Date of creation: Jan 2005
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Publication status: published as Gordon H. Hanson & Kenneth Scheve & Matthew J. Slaughter, 2007. "Public Finance And Individual Preferences Over Globalization Strategies," Economics and Politics, Blackwell Publishing, vol. 19(1), pages 1-33, 03.
Handle: RePEc:nbr:nberwo:11028

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  1. Anna Maria Mayda, 2006. "Who Is Against Immigration? A Cross-Country Investigation of Individual Attitudes toward Immigrants," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 510-530, August.
  2. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, June.
  3. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  4. David Card, 1997. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," NBER Working Papers 5927, National Bureau of Economic Research, Inc.
  5. George J. Borjas & Lynette Hilton, 1995. "Immigration and the Welfare State: Immigrant Participation in Means- Tested Entitlement Programs," NBER Working Papers 5372, National Bureau of Economic Research, Inc.
  6. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  7. Hanson, Gordon H. & Slaughter, Matthew J., 2002. "Labor-market adjustment in open economies: Evidence from US states," Journal of International Economics, Elsevier, vol. 57(1), pages 3-29, June.
  8. Hainmueller, Jens & Hiscox, Michael J., 2007. "Educated Preferences: Explaining Attitudes Toward Immigration in Europe," International Organization, Cambridge University Press, vol. 61(02), pages 399-442, April.
  9. K. H. O'Rourke & R. Sinnott, 2001. "The Determinants of Individual Trade Policy Preferences: International Survey Evidence," Trinity Economics Papers 200110, Trinity College Dublin, Department of Economics.
  10. Kevin H. O'Rourke & R. Sinnott, 2003. "Migration Flows: Political Economy of Migration and the Empirical Challenges," Trinity Economics Papers 20036, Trinity College Dublin, Department of Economics.
  11. Borjas, George J., 2003. "Welfare reform, labor supply, and health insurance in the immigrant population," Journal of Health Economics, Elsevier, vol. 22(6), pages 933-958, November.
  12. Jens Hainmueller & Michael J. Hiscox, 2005. "Learning to Love Globalization? Education and Individual Attitudes Toward International Trade," International Trade 0505011, EconWPA.
  13. Anna Maria Mayda & Dani Rodrik, 2001. "Why Are Some People (and Countries) More Protectionist Than Others?," NBER Working Papers 8461, National Bureau of Economic Research, Inc.
  14. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
  15. Lori G. Kletzer & Robert E. Litan, 2001. "A Prescription to Relieve Worker Anxiety," Policy Briefs PB01-02, Peterson Institute for International Economics.
  16. Kenneth F. Scheve & Matthew J. Slaughter, 2001. "Labor Market Competition And Individual Preferences Over Immigration Policy," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 133-145, February.
  17. Scheve, Kenneth F. & Slaughter, Matthew J., 2001. "What determines individual trade-policy preferences?," Journal of International Economics, Elsevier, vol. 54(2), pages 267-292, August.
  18. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
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