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Labor unions and the electoral consequences of trade liberalization

Author

Listed:
  • Pedro Molina Ogeda
  • Emanuel Ornelas
  • Rodrigo R. Soares
Abstract
We show that the Brazilian trade liberalization in the early 1990s led to a permanent relative decline in the vote share of left-wing presidential candidates in the regions more affected by the tariff cuts. This happened even though the shock, implemented by a right-wing party, induced a contraction in manufacturing and formal employment in the more affected regions, and despite the left's identification with protectionist policies. To rationalize this response, we consider a new institutional channel for the political effects of trade shocks: the weakening of labor unions. We provide support for this mechanism in two steps. First, we show that union presence-proxied by the number of workers directly employed by unions, by union density, and by the number of union establishments-declined in regions that became more exposed to foreign competition. Second, we show that the negative effect of tariff reductions on the votes for the left was driven exclusively by political parties with historical links to unions. Furthermore, the impact of the trade liberalization on the vote share of these parties was significant only in regions that had unions operating before the reform. These findings are consistent with the hypothesis that tariff cuts reduced the vote share of the left partly through the weakening of labor unions. This institutional channel is fundamentally different from the individual-level responses, motivated by economic or identity concerns, that have been considered in the literature.

Suggested Citation

  • Pedro Molina Ogeda & Emanuel Ornelas & Rodrigo R. Soares, 2021. "Labor unions and the electoral consequences of trade liberalization," CEP Discussion Papers dp1816, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1816
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    References listed on IDEAS

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    1. David Autor & David Dorn & Gordon Hanson & Kaveh Majlesi, 2020. "Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure," American Economic Review, American Economic Association, vol. 110(10), pages 3139-3183, October.
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    Cited by:

    1. Blanchard, Emily J. & Bown, Chad P. & Chor, Davin, 2024. "Did Trump’s trade war impact the 2018 election?," Journal of International Economics, Elsevier, vol. 148(C).
    2. Dix-Carneiro, Rafael & Kovak, Brian K., 2023. "Globalization and Inequality in Latin America," IZA Discussion Papers 16363, Institute of Labor Economics (IZA).
    3. Jirjahn, Uwe, 2024. "Corporate Globalization and Worker Representation," IZA Discussion Papers 16727, Institute of Labor Economics (IZA).
    4. Shuichiro Nishioka & Eric Olson, 2023. "The political effects of trade with Japan in the 1980s," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 451-471, April.
    5. Shuichiro Nishioka & Eric Olson, 2022. "The Political Effects of Trade with Japan in the 1980s," Working Papers 22-04, Department of Economics, West Virginia University.

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    More about this item

    Keywords

    trade shocks; elections; unions; Brazil;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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