Globalisation, Government Popularity, and the Great Skill Divide

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By Cevat Giray Aksoy, Principal Economist, European Bank for Reconstruction and Development; Research; Sergei Guriev. Chief Economist, European Bank for Reconstruction and Development; Professor of Economics (on leave), Sciences Po Paris; and Daniel Treisman, Professor of Political Science, UCLA. Originally published at

Attitudes toward globalisation have emerged as a new dimension of political alignment, alongside – or even instead of – the traditional left-right cleavage. This column uses data covering nearly 450,000 individuals in 188 countries over the last ten years to show that highly skilled individuals approve of their government more when high skill-intensive exports increase, but approve of it less when high skill-intensive imports rise. More generally – and contrary to the conventional wisdom – unskilled workers do not oppose imports and blame their leaders for failing to protect markets.

The politics of trade has recently dominated headlines. A US presidential election turned in large part on one candidate’s promise to get tough against imports from China and Mexico. Across Eastern Europe, populist leaders have taken stands against EU integration, and in the UK a majority recently voted to leave. Although anxiety about immigration and weakened sovereignty are common themes in the discontent, anger at the perceived loss of jobs to international competition is also highly salient.

Trade Flows and Politics

The attitudes toward globalisation have emerged as a new dimension of political alignment, alongside – or instead of – the traditional left-right redistribution axis. Yet, although some scholars have explored implications of classic trade theories for preferences on trade policy (Scheve and Slaughter 2001, O’Rourke and Sinnott 2001, Mayda and Rodrik 2005) until very recently, there has been little systematic empirical analysis of the links between global trade and mass politics.

Three recent papers evaluate the impact of international trade on voting in the US. Margalit (2011) shows that job losses from import competition depressed the vote share of the incumbent president in 2004 and 2008. Jensen et al. (2017) also find that trade-related losses of manufacturing jobs cost incumbents votes. They show, in addition, that rising employment in high-skill export industries led to higher incumbent support. Autor et al. (2016) examine the polarisation of US politics and find that congressional districts exposed to greater increases in import penetration (due to the ‘’ following China’s accession to the WTO) disproportionately removed moderate politicians from office in the 2000s. Fewer papers have looked for political consequences of trade in a cross-national context (e.g. Colantone and Stanig, 2017 for Europe, and Margalit 2017 for 16 countries covered by two rounds of the ISSP survey).

Does the Skill Profile Matter?

In a recent paper we hypothesise – following the Heckscher-Ohlin-inspired studies of policy preferences – that attitudes will depend on the interaction between an individual’s skill level and the skill-intensity of the country’s imports and exports (Aksoy et al. 2017). Empirically, we disaggregate individuals and trade flows on the basis of skill intensity. Reaching beyond self-reported attitudes towards trade, we study support for incumbent officials, which has a more direct connection to voting. At the same time, rather than assuming a particular pattern of trade flows based on countries’ factor endowments – a pattern known to be at best only partly accurate – we use a direct measure of actual flows. Our main hypothesis is that highly skilled workers are more likely to support the incumbent national leadership if skill-intensive imports are falling and skill-intensive exports are growing.

Based on a unique data set from the Gallup World Poll including 118 countries and nearly 450,000 individuals over the last ten years, our results reveal a causal impact of trade patterns on approval of political leaders. (In order to identify causality, we use sea-to-air-distance instruments conventional in the recent trade literature).

What the Data Say

As expected, we find that the interaction between individuals’ characteristics and their country’s trade structure matters. Highly skilled individuals approve of their government more when high-skill intensive exports increase, but approve of it less when high-skill intensive imports rise. High-skill intensive trade does not affect political approval among the unskilled. More generally, we find – contrary to the conventional wisdom – that unskilled workers do not oppose imports and blame their leaders for failing to protect markets, rather the reverse.

The effects do not appear to vary with age or gender. They are stronger for rural residents, who often have fewer alternatives when local firms are forced to close. We also find that outsourcing of jobs to the developing world may blunt the impact of openness on attitudes of the highly educated in recipient countries.

The size of the effects is significant: each 10% increase in skill-intensive exports boosts political approval among skilled individuals by 1.2 percentage points. The respective number for skill-intensive imports is 1.7 percentage points. To illustrate, we estimate the total effects for countries with large changes in skill-intensive trade flows. Where skill intensive exports rose sharply (Bulgaria, Lithuania, Nigeria, and Slovakia), trade explains a quarter of the increase in political approval among highly skilled individuals. In countries with large increases in skill intensive imports (Chile, Paraguay, South Korea, and Turkey), trade explains from one half to two thirds of the fall in approval among the highly skilled.

Implications

Our results have different implications for countries with different skill-intensity profiles of trade. By definition, not all countries can export more skill-intensive products than they import. As education levels rise, political approval should tend to increase in countries with faster growth of skill-intensive exports than imports – but to trend lower in other countries. However, the downside effects will generally be more than offset by the direct impact of education: highly skilled individuals tend to approve more of incumbent leaders and governments.

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22 comments

  1. cnchal

    Great article. One question though.

    What is a highly skilled individual referenced in this article, skilled at?

    Reply
    1. Summer

      See:

      by David Graeber

      Not a link, but the article is recent. It focuses on the academic world, however, the issues discussed are part of the entire business world (or the world as a business).

      Reply
    2. nonsense factory

      That is best explained by Ha Joon Chang, 23 Things They Didn’t Tell You About Capitalism, Item #3.

      “There is no reason why . . . the bulk of the workforce in Sweden (and that of any other rich country) could not be replaced by some Indians, Chinese or Ghanaians. Most of these foreigners would be happy with a fraction of the wage rates that Swedish workers get paid, while all of them would be able to perform the job at least equally well, or even better. And we are not simply talking about low-skill workers such as cleaners or street-sweepers. There are huge numbers of engineers, bankers and computer programmers waiting out there in Shang-hai, Nairobi or Quito, who can easily replace their counterparts in Stockholm, Linkoping and Malmo. However, these workers cannot enter the Swedish labour market because they cannot freely migrate to Sweden due to immigration control. As a result, Swedish workers can command fifty times the wages of Indian workers, despite the fact that many of them do not have productivity rates that are higher than those of Indian workers.”

      I have a feeling this study weighed educational history into their reported ‘skill level’, too:

      “. . .a free-market economist might argue that Sven [highly paid Swede] gets paid more [than low-paid Indian] because he has more ‘human capital’, that is, skills and knowledge accumulated through education and training. Indeed, it is almost certain that Sven has graduated from high school, with twelve years of schooling under his belt, whereas Ram probably can barely read and write, having completed only five years of education back in his village in Rajahstan. However, little of Sven’s additional human capital acquired in his extra seven years of schooling would be relevant for bus driving. He does not need any knowledge of human chromosomes or Sweden’s 1809 war with Russia in order to drive his bus well. So Sven’s extra human capital cannot explain why he is paid fifty times more than Ram is.”

      So what is this study really saying? The longer you stay in school, the more likely you are to support the political status quo and the socioeconomic system? Probably because you are a beneficiary of the status quo, right, otherwise how could you afford all that schooling?

      Reply
      1. oh

        Thanks for referencing this book. I read Joon’s other book “The Bad Samaritans” and it was excellent. He writes well and in impeccable english (Oxford educated person).

        Reply
      2. flora

        “So what is this study really saying? ”

        hmmm… maybe it’s saying that people in protected classes of employment – professionals who in aggregate have the political clout to block meaningful foreign competition for their jobs – don’t mind global labor arbitrage because they aren’t negatively subject to its economic impact. Just a guess.

        Reply
        1. Altandmain

          Yep.

          The economist Dean Baker noted exactly that.

          Baker is one of the few economists that I follow closely since he got many of the events right.

          Reply
          1. jrs

            I don’t think immigration breaks down so cleanly, because there are a lot of overhead jobs held by American citizens that DEPEND ON immigration. And no they aren’t all protected categories. There are administration jobs in fields where the blue collar labor is mostly immigrant like construction for instance that depend on immigration. But they could just employ Americans to do blue collar jobs, in theory but it seems that is not happening, and is not likely to happen at this point, that cat may be out of the bag. Then of course there are others hurt by immigrants low skilled and middle skilled (H1B) workers competing directly with immigrants.

            Global wage arbitrage is of course much bigger than just immigration and outsourcing dwarfs immigration by orders of magnitude in job impact.

            Reply
            1. JBird

              To perdition with anyone who DEPEND ON immigration. Does anyone think it was chance that destroyed all the well paid unionized construction jobs formerly held by Americans? Does anyone need a bridge?

              Immigrant labor, both skilled and unskilled, is not only encouraged, but actively abetted, using a network of illegal labor brokerage companies, and by consulting firms that guide companies on how to find, import, hire, and manage technically illegally employed indentured workers ( serfs ) while avoiding law enforcement. They depend on immigration because they refuse to pay anything near a survivable wage (Note, I did not say a living wage). These serfs are used to illegally replace currently working American citizens, bust unions, and generally brutally terrorize, demoralize, even crush anyone thinking that they have “rights.”

              Sixty years ago one could live as a low skilled worker in Santa Clara County. You would not have been thrilled by the not so great wages, but buying, certainly renting a whole house and raising a family was very doable before Silicon Valley became a thing. Just how many people can that anywhere in the whole of the United States?

              Reply
          2. Scott1

            Look to Aviation employment categories for precedents along with Hollywood & NYC Film & Television where skills & human capital combine to determine hiring of the whole person.

            In both cases added value, educated versatile human capital either on set or on the ramp increases employability & an infrastructure of Unions has been created & compete internationally either raising standards across borders or having the potential to do so.

            Labor which does not own the means of production invariably has two choices, be protected by the State or Unite.

            I myself see doctors as labor for the Healthcare system and the system in the United States out to trick or trap about everybody who does any work.

            So I resist plans that desire to bring in lower grades of any labor that need to be of sensed, but not measured, human capital, along with certifiable skills. (I do not know why I will not rewrite this sentence for clarity.)

            I want American Pilots & American Doctors to all be professionals and see within the US & Internationally
            how the Pilots tend to unionize.
            Filmmakers also have a lot of mobility. Major producers don’t hire non union labor for their movies because for one thing Union Labor is safer.

            In the case of doctors they are either protected within the systems they now work for, or benefit from status & conditions created before they were born.

            In the end of it Labor that inherently has mobility will work for the National Carriers or Systems Private or Nationalized that gives them the most money & overall quality of life.

            Of the people of the world who are Labor I would hazard to guess that Pilots have the most mobility & we could look to their statistical competitive positions for clues to what works for the best outcomes for the public, & the individual.

            Reply
        2. Stephen Gardner

          Anyone who thinks they are safe is delusional. I work at a company that hires armies of H1B software “professionals” as a part of the never ending game of labor arbitrage that comes with managerialism. Modern capitalism is like that TV show, the highlander. The managers just keep cutting until they have eliminated anyone not in the 0.01%. In the end there can only be one.

          Reply
          1. cnchal

            Are the software “professionals” the low skilled workers and the managers that exploit them to the max the high skilled?

            Reply
          2. Otis B Driftwood

            From my perspective as a manager in a healthcare technology outfit, software engineering hiring is more impacted today by shifts in the healthcare IT market that is (probably not coincidentally) aligned with the increasing emphases everywhere you look on data science and AI.

            That is a pretty big change for a couple of reasons. While software developers must constantly be focused on learning new skills and technologies, in healthcare IT financial and clinical analytics are driving the market and that means firms are looking for PhDs in data science. This isn’t the same as the C++ programmer twenty years ago who had to learn Java and web development, or the .NET developer who has been going to Strata and learning about Scala and Spark and AWS. It’s a fundamental shift in business focus.

            Add to the mix the impact on changes to the H1B program, and this makes for very uncertain times for many people who have been working in this country for several years, have bought houses, got married, started families and are now caught midstream in the process toward citizenship. They are worried and anxious about their future.

            I’ve never experienced a time when a software position was given to an H1B applicant in favor of a citizen in order to save money. In the Bay Area in particular, second and third tier technology companies (like mine) have always had to compete with Apple, Twitter, Facebook, Google and Amazon, etc. for engineering talent. Without access to foreign workers, in years past it would be impossible to fully staff our R&D teams.

            To Baker’s point, and to others in this thread who have asked, the line between highly skilled and lower skilled within software development is always changing. To wit, I expect more reliance on H1B to staff those PhD level software engineering positions while jobs that require more basic skills (SQL, Java, .NET, LAMP) less so. In my own situation, I see those basic jobs getting moved to lower priced areas of the country or outsourced.

            Reply
            1. Harrold

              “I’ve never experienced a time when a software position was given to an H1B applicant in favor of a citizen in order to save money.”

              You must work with blinders on.

              Cost is the reason H1-B visas are tied to companies and not individuals.

              Reply
      3. sgt_doom

        Nicely summed up — I consider this study to be another of the countless and endless bullcrap papers spewed forth which can easily be summed up with one commonsensical sentence — which is why I generally only pay attention to Michael Hudson, Michael Perelman, Samir Amin, Steve Keen, and occasionally, Dean Baker.

        Reply
      4. cnchal

        >“. . .a free-market economist might argue that Sven [highly paid Swede] gets paid more [than low-paid Indian] because he has more ‘human capital’, that is, skills and knowledge accumulated through education and training.

        Free market economists argue a lot, some of it makes no sense. If the low paid Indian moved to Sweden and did Sven’s bus driving jawb, Ram would now be a high paid Indian. It would be very difficult for Ram to drive the bus while living in India. It’s got nothing to do with “human capital”. It’s a function of what your neighbors are making and being able to live in that locality. Could Ram move to Sweden and offer to drive the bus for a buck a day? I don’t think so, as he wouldn’t make enough to buy an apple, never mind 3 squares a day.

        It seems to be a type of Rolls Royce question. If you have to ask how much, that automatically means you can’t afford it. In this context asking for an explanation of what a high skilled individual does in the context of this article, implies that the questioner has low skill. Not very flattering to the self, but the secrecy surrounding the definition of “high skill” is a bit bewildering when none of the “high skilled” are either interested or are not capable of describing a high skilled jawb.

        Or is the definition of a high skilled worker someone that holds a bullshit jawb? Who is kidding whom, then?

        Reply
      5. Steve Ruis

        Re “As a result, Swedish workers can command fifty times the wages of Indian workers, despite the fact that many of them do not have productivity rates that are higher than those of Indian workers.” This is one of the major problems with capitalism. The labor costs established by the cost of living in Country A are compared with the same in an entirely different country. So what if the labor costs are cheaper elsewhere? The pursuit of the cheapest possible labor creates what social good, if any?

        I am reminded of the imposition of the Metric System in France. All of the systems of measure in the French countryside were developed through extensive labor negotiations. Rather than having standards from the outside, grain harvesters negotiated the size of the bushels they would harvest based upon how many a worker could expect to fill in a day. Laborers wanted a smaller basket, owners wanted a larger one and they came to an agreement over the size over time. In come the metric people stating they were going to change the measures and all hell broke loose. A perfectly happy labor arrangement was being disrupted for no good reason.

        So, if the Swedes negotiate their high wage economy, then they should have it. The shakeout should come when Sweden tries to sell its goods in foreign lands, not by importing labor, whose cost was established by the conditions in a foreign land. The ability to an engineer in Bangladesh to do a job is irrelevant in Sweden, or should be. If a Swedish entrepreneur wants those low labor costs, they should go to Bangladesh and set up a business. Then Sweden and Bangladesh can work out the value of those goods through trade.

        It is called competition … fair competition.

        Reply
  2. MisterMr

    If I understand the article right, it says that high skilled workers (the supposedly protected jobs) oppose globalization when their jobs go away, not low skilled ones.

    Reply
  3. Sound of the Suburbs

    The average IQ is 100.

    Roughly half the population will have an IQ of 100 or lower.
    Roughly half the population will have an IQ of 100 or higher.

    Countries used to have varied economies accounting for the variations in the population.

    Can education move the average IQ above 100?

    Reply
    1. drumlin woodchuckles

      If education moves the average smartness level upwards, that means that it would take more smartness to post an IQ of 100. The “average” itself would be “higher”. If EVVVVV ry one is smarter, the average itself is “higher”. But its still “average” and therefor still “IQ 100”. That’s what “average” means.

      Did I pass the test?

      Reply
  4. Indian Jones

    each 10% increase in skill-intensive exports boosts political approval among skilled individuals by 1.2 percentage points. The respective number for skill-intensive imports is 1.7 percentage points

    Gut check: 10% uniform economic growth forecasts .5% decline in support for government. Seems this study “neglects” a dark factor.

    Reply

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