According to the embedded liberalism thesis, governments committed to free trade provide insurance and other transfers to compensate those who lose economically from expanded trade. The goal of this spending is to maintain public support for trade liberalization. We provide a micro-level test of the critical assumption behind the embedded liberalism thesis that government programs designed to protect individuals harmed by imports reduce opposition to free trade. Our micro results have important implications for the macro relationship between trade and government spending, which we also test. We find empirical support for the embedded liberalism thesis in both our micro- and macro-level analyses.Earlier versions of this article were presented at the Midwest Political Science Association's 2002 Meeting and at the University of Illinois during summer 2003. We thank the respective panel and seminar participants for their feedback. In addition, we want to acknowledge valuable comments from William Bernhard, Rebecca Blank, Kerwin Charles, Alan Deardorff, John DiNardo, John Freeman, Brian Gaines, Jim Granato, Nathan Jensen, William Keech, Layna Mosley, Robert Pahre, Ken Scheve, Marina Whitman, two anonymous reviewers, and Lisa Martin. They, of course, are not responsible for any errors.
Previous institutional explanations of trade policy have focused on the role of proportional representation on the promotion of free trade+ This explanation generates numerous unsolved anomalies and provides limited guidance in explaining the difference between proportional representation countries and between majoritarian countries as well as within-country variation in trade policy+ This article introduces a more general institutional theory that argues that the number of access points provided by institutions is the crucial institutional feature, as increasing the number of access points makes lobbying less costly, which benefits protectionists+ From this, I hypothesize that the number of parties in government, the number of electoral districts, the nature of the vote, and other such institutions affect the level of protection and that, once these factors are controlled for, proportional representation has no impact on trade policy+ I test this theory on tariff data in the post-World War II developed democracies and find broad support for these hypotheses+ Leading explanations of the political institutional determinants of trade policy usually focus on the role of proportional representation~PR! versus plurality elec-tions+ 1 Political scientists and economists have both offered the explanation that PR insulates policymakers from protectionist demands that should lead to PR systems having lower levels of protection+ However, this blunt distinction cannot account for all of the variation in trade policy between~and within countries! and generates numerous anomalies+ For instance, Ireland and Switzerland, both PR countries, have had relatively high tariffs compared to other post-World War II developed democracies, while Japan, Canada, and the United States, all non-PR countries,
This research offers a general framework for thinking about how individual disposition towards risk influences public policy opinions. Affinity for or aversion to risk is, in part, a stable personality characteristic that interacts with risk and reward messages in complex policy debates. We examine the implications of this for public opinions about free trade with extensions to immigration policy. We argue and find that opinions about policy depend jointly upon one's exposure to potential gains or losses and one's risk orientation. The findings have implications for crafting and framing public policies because they highlight how individual characteristics are likely to shape the public response to policy proposals. Our findings suggest that there may be limits, in the aggregate, to the degree to which elites can alter the level of support for policies through framing or through offering riskmitigating policy provisions.
The political economy of trade literature argues that compensating those who lose from trade is an important component of maintaining public support for free trade, a linkage known as the compensation hypothesis or embedded liberalism thesis. Previous research has found support for many elements of the causal chain underlying embedded liberalism; however, there has been little research on the most crucial element of the causal chain, namely that compensation policies lead to increased support for trade. This article provides a direct test of the compensation hypothesis using a survey-based experiment conducted in the United States that exposes half of the respondents to knowledge of compensation programs and then asks for their opinion on trade policy. The article explores whether knowledge of compensation increases support for trade as well as who is influenced by this knowledge and, thus, provides a crucial test of the embedded liberalism thesis.It is widely accepted that trade has significant distributional consequences within a country. While economic theory suggests that free trade is beneficial for a country as a whole, it will hurt individuals who face the risk of job or income loss because of increased imports. Because the costs of trade are concentrated on those individuals who lose income and corporations that lose profit, while the gains of trade-most importantly, lower prices-are dispersed on all consumers, opponents to trade are better able to overcome the collective action problem. As a result, the typical result of the trade policy process has tended to be some level of protectionism, as has been argued by the endogenous tariff literature.So how has the world economy steadily moved closer towards free trade since the end of World War II? One popular explanation is the Embedded Liberalism Thesis, first offered by Ruggie (1982), 2 which suggests that after World War II, policymakers combined movement towards free trade with programs that compensated individuals for the potential losses due to trade. If successful, this compensation can increase support of and decrease opposition to trade, and thus, the embedding of liberal trade policies within a larger welfare state can maintain support for trade despite trade's distributional consequences. The Embedded Liberalism Thesis, therefore, has a clear implication for individual trade policy
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