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Trade‐Induced Unemployment: How Much Do We Care?

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  • Yoto V. Yotov

Abstract

It is a common perception that a government, especially in the face of elections, is particularly sensitive to the presence of trade‐induced unemployment. In this paper, I ask: how much weight does the incumbent politician actually attach to unemployment resulting from trade? To answer, I build a model that captures government's sympathy to trade‐affected workers and allows me to decompose the channels through which trade‐induced unemployment affects the level of sectoral protection chosen by a politically‐driven incumbent official. I provide empirical evidence that the US government is very sensitive to the presence and the magnitude of trade‐induced unemployment. Specifically, I estimate the weight that the office holder attaches to the welfare of trade‐affected workers to be positive, significant, and four times larger than the weight on the welfare of those who are not affected by trade.

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  • Yoto V. Yotov, 2010. "Trade‐Induced Unemployment: How Much Do We Care?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 972-989, November.
  • Handle: RePEc:bla:reviec:v:18:y:2010:i:5:p:972-989
    DOI: 10.1111/j.1467-9396.2010.00920.x
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    1. Christopher Laincz & Xenia Matschke & Yoto V. Yotov, 2021. "Policy and politics: Trade adjustment assistance in the crossfire," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 760-792, May.
    2. Uysal, Pinar & Yotov, Yoto V. & Zylkin, Thomas, 2015. "Firm heterogeneity and trade-induced layoffs: An empirical investigation," European Economic Review, Elsevier, vol. 75(C), pages 80-97.
    3. Stephanie Meinhard & Niklas Potrafke, 2012. "The Globalization–Welfare State Nexus Reconsidered," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 271-287, May.
    4. Baybars Karacaovali, 2015. "Varying Political Economy Weights of Protection: The Case of Colombia," Economics and Politics, Wiley Blackwell, vol. 27(2), pages 290-312, July.
    5. Yoto V. Yotov, 2013. "Trade Adjustment, Political Pressure, And Trade Protection Patterns," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1867-1885, July.
    6. Baybars Karacaovali, 2011. "Trade Policy Determinants and Trade Reform in a Developing Country," Fordham Economics Discussion Paper Series dp2011-03, Fordham University, Department of Economics.
    7. Baybars Karacaovali, 2012. "Trade Policy Determinants and Trade Reform in a Developing Country: The Case of Colombia," Working Papers 201220R, University of Hawaii at Manoa, Department of Economics.

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