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An Empirical Analysis of Trade-Related Redistribution and the Political Viability of Free Trade

  • Lake, James

    ()

    (Southern Methodist University)

  • Millimet, Daniel L.

    ()

    (Southern Methodist University)

Even if free trade creates net welfare gains for a country as a whole, the associated distributional implications can undermine the political viability of free trade. We show that trade-related redistribution increases the political viability of free trade in the US. We do so by assessing the causal effect of expected redistribution associated with the US Trade Adjustment Assistance program on US Congressional voting behavior on eleven Free Trade Agreements (FTAs) between 2003 and 2011. We find that a one standard deviation increase in redistribution leads to more than a 3% point increase in the probability of voting in favor of an FTA for the median representative. In addition, a one standard deviation decrease in redistribution across the entire US would have precluded passage of two of the eleven FTAs in our sample.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8086.

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Length: 55 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:iza:izadps:dp8086
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