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Instrumental Variables and Causal Mechanisms: Unpacking The Effect of Trade on Workers and Voters

Author

Listed:
  • Christian Dippel
  • Robert Gold
  • Stephan Heblich
  • Rodrigo Pinto

Abstract

Instrumental variables (IV) are a common means to identify treatment effects. But standard IV methods do not allow us to unpack the complex treatment effects that arise when a treatment and its outcome together cause a second outcome of interest. For example, IV methods have been used to show that import exposure to low-wage countries has adversely affected Western labor markets. Similarly, they have been used to show that import exposure has increased voter polarization. However, standard IV cannot estimate to what extent the latter is a consequence of the former. This paper proposes a new identification framework that allows us to do so, appealing to one additional identifying assumption without requiring additional instruments. The added identifying assumption can be relaxed, and bounds instead of point estimates can be derived. Applying this framework, we estimate that labor market adjustments explain most to all of the effect of import exposure on voting, thereby providing rigorous evidence that the correct policy response to voter polarization has to be focused on labor markets.

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  • Christian Dippel & Robert Gold & Stephan Heblich & Rodrigo Pinto, 2017. "Instrumental Variables and Causal Mechanisms: Unpacking The Effect of Trade on Workers and Voters," NBER Working Papers 23209, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23209
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    Cited by:

    1. Bhalotra, Sonia R. & Karlsson, Martin & Nilsson, Therese & Schwarz, Nina, 2016. "Infant Health, Cognitive Performance and Earnings: Evidence from Inception of the Welfare State in Sweden," IZA Discussion Papers 10339, Institute of Labor Economics (IZA).
    2. Mullally, C., 2018. "Migration and economic activity among origin households: the role of female household headship," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276993, International Association of Agricultural Economists.
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    5. Kersting, Felix, 2017. "Coal and Blood: Industrialization and the Rise of Nationalism in Prussia before 1914," Rationality and Competition Discussion Paper Series 52, CRC TRR 190 Rationality and Competition.
    6. Clément Malgouyres, 2017. "Trade Shocks and Far-Right Voting: Evidence from French Presidential Elections," RSCAS Working Papers 2017/21, European University Institute.
    7. repec:eee:inecon:v:114:y:2018:i:c:p:316-330 is not listed on IDEAS
    8. Keita, Sekou & Mandon, Pierre, 2018. "Give a fish or teach fishing? Partisan affiliation of U.S. governors and the poverty status of immigrants," European Journal of Political Economy, Elsevier, vol. 55(C), pages 65-96.
    9. Bijwaard, G.E.; & Jones, A.M.;, 2019. "Education and life-expectancy and how the relationship is mediated through changes in behaviour: a principal stratification approach for hazard rates," Health, Econometrics and Data Group (HEDG) Working Papers 19/05, HEDG, c/o Department of Economics, University of York.

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    JEL classification:

    • F1 - International Economics - - Trade
    • F6 - International Economics - - Economic Impacts of Globalization
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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