Incumbents Beware: The Impact of Offshoring on Elections

Abstract

How does globalization affect politics? One of the most controversial aspects of globalization is offshoring, when manufacturing operations and business functions move abroad. Although voters generally dislike offshoring, it remains unclear how moving jobs abroad impacts democratic elections. Using a difference-in-differences estimation strategy, the author finds that incumbent government parties lose more votes in municipalities where a local plant moved production abroad between elections than in municipalities that did not experience such an event. The result holds across various time periods, different incumbent parties and diverse types of elections. In both national and regional elections, voters punish incumbent government parties when a local firm moves production abroad. Incumbent parties' vote shares fall as the number of jobs lost due to offshoring increases. In multiparty governments, voters disproportionately punish the largest coalition party for offshoring. The results of an original survey administered in Spain verify the importance of offshoring for voters' retrospective evaluations of incumbents.

Economic Shocks, Mobilization, and Regional Elite Splits

“…For instance, Hierro and Queralt (2021) have demonstrated that in contemporary settings voters employed in export-oriented economic sectors are more likely to support independence. Along similar lines, Rickard (2021) has shown how support for state-wide incumbent political parties declined when voters were exposed to offshoring events, while support for the only regional party in cabinet received larger support rates after these events. The conclusions in this paper are congruent with the findings on voters’ political behavior.…”

Economic Geography, Politics, and the World Trade Regime

“…Trade shocks also correlate with anti-incumbent voting. In Spain, citizens in municipalities that experienced an offshoring event (i.e., a plant closure to move production abroad) voted against the national incumbent government party (and regional government parties) at relatively higher rates (Rickard, 2021). In the United States, voters punished incumbent politicians for local import shocks (e.g., Che et al, 2016;Jensen et al, 2017) and trade-related job losses (Margalit, 2011).…”

“…In Spain, for example, the government provided generous subsidies to the Seat and Ford automotive plants in Barcelona and Valencia (Jofre-Monsenyand et al, 2018). Additionally, the multinational company Lear, who operated an electrical components plant in Cervera, Spain received various types of economic incentives from the government, including subsidies and tax allowances (Rickard, 2021).…”

“…Second, people living in the same region may hold similar preferences about trade because of local sociptropism. Local sociotropism refers to the idea that voters are concerned about the economic well-being of their community and not simply their own personal financial situation (e.g., Lewin, 1991;Alkon, 2017;Rickard, 2021). Research shows that voters often consider the interests of others when formulating their attitudes about economic policies and the governments responsible for them (Mansfield and Mutz, 2009;Lü et al, 2012).…”

“…World Trade Review economic well-being of their community and not simply their own personal financial situation (e.g., Lewin, 1991;Alkon, 2017;Rickard, 2021). Research shows that voters often consider the interests of others when formulating their attitudes about economic policies and the governments responsible for them (Mansfield and Mutz, 2009;Lü et al, 2012).…”