Importing Threat: The Electoral Logic of Economic Relief

Commercial policies are often only efficient insofar as those harmed can be compensated. In practice, compensatory measures fall far short of distributive harm. We rationalize the paucity of compensation as a strategic effort on the part of elected officials to withhold information about effects of their policy initiatives. We develop a formal model in which citizens must infer the effects of a policy initiative as well as the politician's commitments from the choice to offer compensation. We find that committed policymakers under-provide compensation to avoid electoral backlash. Using microdata from the US Trade Adjustment Assistance program, we replicate a research design that uses exogenous allocation of petitions for assistance across bureaucrats for causal identification. We find that a ten percent increase in the TAA certification rate decreases support for Democratic candidates by 1:75% in areas hard hit by import-competition. This electoral effect incentivizes pro-distributive politicians to under-provide economic assistance.