Working Paper: NBER ID: w30040
Authors: Stefanie Stantcheva
Abstract: This paper sheds new light on two questions: How do people perceive and understand trade and trade policy, and what shapes their support for different trade policies? Despite extensive research documenting the efficiency gains from trade and its distributional impacts on different groups of workers, firms, and consumers, we still need to uncover how people perceive these various effects of trade. Trade involves many trade-offs. When forming their views on trade policy, people have to balance their roles as consumers and workers, consider both personal and broader economic and societal impacts, and evaluate concerns of efficiency and equity. Which of these considerations matters most? Using new large-scale surveys and experiments, I highlight three main findings. First, while earlier work has established that consumer gains from trade are diffuse and job losses are concentrated, I directly show the impact of these two considerations on people’s views about trade. I find that perceived job risks matter more for policy views than perceived consumer gains. Second, beyond their own material self-interest, people care about the broader efficiency gains and adverse distributional consequences from trade. Support for free trade is best predicted by the belief that trade generates efficiency gains. Concerns about the adverse distributional consequences of trade do not necessarily reduce support for free trade: instead, they increase support for compensatory redistribution. These results also highlight the importance of compensatory redistribution as an indissociable part of trade policy in people’s minds. Third, personal exposure to trade shapes policy views in two ways: directly (through self-interest) and indirectly by changing people’s perceptions of trade’s broader efficiency and distributional implications.
Keywords: Trade Policy; Public Perception; Compensatory Redistribution
JEL Codes: D72; D91; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| perceived job risks (J28) | policy views (J18) |
| perceived consumer gains (D12) | policy views (J18) |
| broader efficiency gains (D61) | support for free trade (F13) |
| adverse distributional consequences (D39) | support for compensatory redistribution (H23) |
| personal exposure to trade (F19) | policy views (J18) |
| subjective measures of trade exposure (F14) | policy preferences (D72) |
| objective measures of trade exposure (F14) | policy preferences (D72) |