Working Paper: NBER ID: w30058
Authors: Esteban Mendez; Diana Van Patten
Abstract: We exploit a unique event to study the extent to which popular attitudes toward trade are driven by economic fundamentals. In 2007, Costa Rica put a free trade agreement (FTA) to a national referendum. With a single question on the ballot, 59% of Costa Rican adult citizens cast a vote on whether they wanted an FTA with the United States to be ratified, or not. We merge disaggregated referendum results, which break new ground on anonymity-compatible voting data, with employer-employee, customs, and firm-to-firm transactions data, and data on household composition and expenditures. We document that a firm’s exposure to the FTA, directly and via input-output linkages, significantly influences the voting behavior of its employees. This effect dominates that of sector-level exposure and is greater for voters aligned with pro-FTA political candidates. We also show that citizens considered the expected decrease in consumer prices when exercising their vote. Overall, economic factors explain 6% of the variation in voting patterns which cannot be accounted for by non-economic factors such as political ideology, and played a pivotal role in this vote.
Keywords: trade agreement; firm networks; voting behavior; economic fundamentals; political ideology
JEL Codes: D72; F13; F14; F68; O24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm's exposure to the FTA (F23) | Employees' voting behavior (D72) |
| Indirect exposure through input-output linkages (D57) | Employees' voting behavior (D72) |
| Decrease in consumer prices (E31) | Probability of voting in favor of the FTA (F15) |
| Political alignment (D72) | Pro-ratification votes (K16) |
| Economic factors (P42) | Variation in voting behavior (D72) |