Increasing resistance to globalization: The role of trade in tasks

Abstract

We show in this paper that trade in tasks can explain increasing resistance to globalization in industrialized countries. In a traditional trade model of a small open economy, we demonstrate that schooling provides protection against losses from trade if trade increases the relative price of the skill-intensive good. Furthermore, increasing public schooling expenditure may help securing support for trade reform by a majority of voters. However, this conclusion is no longer true, if education provides task-specific skills and trade in tasks makes some of these skills obsolete in the open economy. In this case, increasing public schooling expenditure may be of limited help to secure support for trade reform by a majority of voters, even if the reform is welfare-improving. Our analysis suggests to change the education system to one that provides broader, less-specialized skills in order to facilitate trade reforms. Although such skills may be less productive, they do not become obsolete in the open economy and therefore increase the likelihood that a proposal for a welfare-improving trade reform is successful in a referendum.

Nonhomothetic Preferences and Rent Sharing in an Open Economy

“…Also, the results from our analysis provide a challenge to the idea that redistribution -be it ex ante, through equalization of endowments, or ex post, through equalization of outcome -can be a successful instrument to increase support for trade liberalization (cf. Davidson and Matusz, 2006;Egger and Fischer, 2018). Even if the trade reform generates aggregate gains, policy intervention that aims at distributing theses gains more equally will influence the trade structure with unintended welfare consequences.…”

“…Therefore, the analysis in this paper raises doubts that so far discussed policy measures remain promising instruments to increase support for trade liberalization (cf. Davidson and Matusz, 2006;Egger and Fischer, 2018), when accounting for demand-side determinants of trade in a setting with nonhomothetic preferences.…”

Local Global Watchdogs: Trade, Sourcing and the Internationalization of Social Activism

“…Grossman & Helpman (2021) study its role in populist trade policy. H. Egger & Fischer (2020) show that it may originate in the effect of increased trade in tasks. We contribute to this analysis by placing advocacy NGOs at center stage: a new type of agent that embodies, channels and institutionalizes this increased resistance to (some aspects of) economic globalization.…”

Collective Memories on the 2010 European Debt Crisis

“…Citizens with a high education tend to favor trade openness and globalization to a larger extent than citizens with a low education. See, for example,Mayda and Rodrik (2005),Harms and Schwab (2018),Harms and Schwab (2020) andEgger and Fischer (2020).4 Bailouts were also negatively associated with satisfaction with democracy (seeSchraff and Schimmelpfennig (2019)). …”