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Envy, Altruism, and the International Distribution of Trade Protection

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  • Xiaobo Lü
  • Kenneth F. Scheve
  • Matthew J. Slaughter
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    Abstract

    One important puzzle in international political economy is why lower-earning and less-skilled intensive industries tend to receive relatively high levels of trade protection. This pattern of protection holds even in low-income countries in which less-skilled labor is likely to be the relatively abundant factor of production and therefore would be expected in many standard political-economy frameworks to receive relatively low, not high, levels of protection. We propose and model one possible explanation: that individual aversion to inequality--both envy and altruism--lead to systematic differences in support for trade protection across industries, with sectors employing lower-earning workers more intensively being relatively preferred recipients for trade protection. We conduct original survey experiments in China and the United States and provide strong evidence that individual policy opinions about sector-specific trade protection depend on the earnings of workers in the sector. We also present structural estimates of the influence of envy and altruism on sector-specific trade policy preferences. Our estimates indicate that both envy and altruism influence support for trade protection in the United States and that altruism influences policy opinions in China.

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    File URL: http://www.nber.org/papers/w15700.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15700.

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    Date of creation: Jan 2010
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    Publication status: published as “Envy, Altruism, and the International Distribution of Trade Protection,” with Xiaobo Lu and Kenneth F. Scheve, American Journal of Political Science, 56(3), 2012.
    Handle: RePEc:nbr:nberwo:15700
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    Find related papers by JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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    Cited by:

    1. Griffin, John & Nickerson, David & Wozniak, Abigail, 2011. "Racial Differences in Inequality Aversion: Evidence from Real World Respondents in the Ultimatum Game," IZA Discussion Papers 5569, Institute for the Study of Labor (IZA).

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