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Public Finance and Individual Preferences Over Globalization Strategies

Author

Listed:
  • Gordon H. Hanson

    (University of California, San Diego)

  • Kenneth F. Scheve

    (University of Michigan)

  • Matthew J. Slaughter

    (Dartmouth College)

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.

Suggested Citation

  • Gordon H. Hanson & Kenneth F. Scheve & Matthew J. Slaughter, 2005. "Public Finance and Individual Preferences Over Globalization Strategies," Working Papers 524, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:524
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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