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Local Economic and Political Effects of Trade Deals: Evidence from NAFTA

Author

Listed:
  • Jiwon Choi

    (Princeton University)

  • Ilyana Kuziemko

    (Princeton University)

  • Ebonya L. Washington

    (Yale University)

  • Gavin Wright

    (Stanford University)

Abstract
Why have white, less educated voters left the Democratic Party over the past few decades? Scholars have proposed ethnocentrism, social issues and deindustrialization as potential answers. We highlight the role played by the 1994 North American Free Trade Agreement (NAFTA). In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses relative to other counties. These losses begin in the mid-1990s and are only modestly offset by transfer programs. While exposed counties historically voted Democratic, in the mid-1990s they turn away from the party of the president (Bill Clinton) who ushered in the agreement and by 2000 vote majority Republican in House elections. Employing a variety of micro-data sources, including 1992-1994 respondent-level panel data, we show that protectionist views predict movement toward the GOP in the years that NAFTA is debated and implemented. This shift among protectionist respondents is larger for whites (especially men and those without a college degree) and those with conservative social views, suggesting an interactive effect whereby racial identity and social issue positions mediate reactions to economic policies.

Suggested Citation

  • Jiwon Choi & Ilyana Kuziemko & Ebonya L. Washington & Gavin Wright, 2021. "Local Economic and Political Effects of Trade Deals: Evidence from NAFTA," Working Papers 303, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:303
    as

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    References listed on IDEAS

    as
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    Cited by:

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    2. Dorn, David & Levell, Peter, 2021. "Trade and Inequality in Europe and the US," CEPR Discussion Papers 16780, C.E.P.R. Discussion Papers.
    3. 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).
    4. repec:zbw:bofitp:2022_012 is not listed on IDEAS
    5. Alberto Alesina & Marco Tabellini, 2024. "The Political Effects of Immigration: Culture or Economics?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 5-46, March.
    6. Ilyana Kuziemko & Nicolas Longuet-Marx & Suresh Naidu, 2024. "“Compensate the Losers?†Economic Policy and Partisan Realignment in the US," Working Papers 321, Princeton University, Department of Economics, Center for Economic Policy Studies..
    7. Natkhov, Timur & Pyle, William, 2023. "Revealed in transition: The political effect of planning's legacy," European Economic Review, Elsevier, vol. 159(C).
    8. Natkhov, Timur & Pyle, William, 2022. "Revealed in transition : The political effect of planning’s legacy," BOFIT Discussion Papers 12/2022, Bank of Finland, Institute for Economies in Transition.
    9. Björn Brey, 2021. "The Effect of Recent Technological Change on US Immigration Policy," CESifo Working Paper Series 9302, CESifo.

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    More about this item

    Keywords

    NAFTA; trade; politics;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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