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Insuring Free Trade: Unemployment Insurance and Trade Policy

Listed author(s):
  • Kono Daniel Y.

    (University of California, Davis)

Registered author(s):

    Research shows that trade openness and high social spending go hand in hand, at least in wealthy democracies. It is not clear, however, exactly why this is so. Many scholars and policymakers argue that generous social spending facilitates trade liberalization, but there is no direct empirical support for this claim. This paper is the first to show directly that social spending promotes freer trade. Specifically, I show that U.S. state-level unemployment insurance makes Congress members significantly more likely to vote for freer trade. Since state unemployment insurance is exogenous to individual congressional votes, my analysis shows clearly that the former affects the latter. My results imply that social spending insures not only citizens but also open trade policies against hard economic times. They also highlight the importance of subnational policy choices to national policy outcomes.

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    Article provided by De Gruyter in its journal Business and Politics.

    Volume (Year): 13 (2011)
    Issue (Month): 3 (October)
    Pages: 1-31

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    Handle: RePEc:bpj:buspol:v:13:y:2011:i:3:n:3
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    1. Rogowski, Ronald, 1987. "Trade and the variety of democratic institutions," International Organization, Cambridge University Press, vol. 41(02), pages 203-223, March.
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    4. Adserà, Alícia & Boix, Carles, 2002. "Trade, Democracy, and the Size of the Public Sector: The Political Underpinnings of Openness," International Organization, Cambridge University Press, vol. 56(02), pages 229-262, March.
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    7. Rudra, Nita, 2002. "Globalization and the Decline of the Welfare State in Less-Developed Countries," International Organization, Cambridge University Press, vol. 56(02), pages 411-445, March.
    8. Bates, Robert H. & Brock, Philip & Tiefenthaler, Jill, 1991. "Risk and trade regimes: another exploration," International Organization, Cambridge University Press, vol. 45(01), pages 1-18, December.
    9. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
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