Heeding to the Losers from Trade.Evidence from Legislators’ Trade PolicyPreferences and Legislative Behavior

M. Victoria Murillo† Pablo M. Pinto‡

†ColumbiaUniversity

‡University of Houston

2015 Meeting of the IPESStanford UniversityNovember 13, 2015

TRADE POLITICS:PREFERENCES AND OUTCOMES

PE scholars have made important contributions tounderstanding individual (and firm) trade policypreferences

But, it is hard to explain trade policy solely on preferencesdrawn from surveys

1. Low prevalence across broad segments of the population2. Multidimensionality of trade policy3. Trade policy is seldom enacted by direct vote or plebiscite

OUR CONTRIBUTION:LOOK AT SUPPLY SIDE OF TRADE POLITICS

Focus on legislators’ preferences and behavior:

High prevalence:Legislators identify benefits of trade, its direct and indirectconsequences, and the consequences of protectionismLegislators are more sophisticated and informed, givencentral position in political system

Dimensionality of trade policy

Identify gains and losses across multiple policy dimensions(prices, employment, inflation and competition)Political discourse and votes on policy instruments chosen toaddress multiple concerns

BACKGROUND:TAXING AGRICULTURAL EXPORTS IN ARGENTINA

High salience of trade in 2007-2008 ArgentinaSoybean has become main Argentine export commodity

Consumers face negative consequences of expansion ofsoy production and higher international prices

Soybean production displaces food production (wheat,maize, livestock)Agricultural exports pushes food prices up

BACKGROUND II:TAXING AGRICULTURAL EXPORTS IN ARGENTINA

C. F. Kirchner’s government raised export tax rates onagricultural products in March 2008

Argued that restricting agricultural exports helps curb foodinflationTaxes on soybean and other agricultural exports are sourceof fiscal revenue

BACKGROUND III:AGRICULTURAL REBELLION OF 2008

BACKGROUND IV:AGRICULTURAL REBELLION OF 2008

Agricultural rebellion ⇒ lockout and road blockagesIn response to protest President CFK sent Bill to Congressto ratify export tax hikeProtest raised salience of Export Tax Bill:

Bill barely passed the Lower Chamber: 129 Yea, 122 Nay, 2abstentionsNumerous defections from government coalitionBill eventually killed by tie-breaking vote of Vice-Presidentin the Senate

LEGISLATORS AND TRADE POLICY

Analyze how legislators respond to institutional incentives

In large districts, comprising industrial and agriculturalactivities, legislators face cross-cutting pressure:

Represent local constituency’s trade policy preferencesFollow party line

EMPIRICAL STRATEGY

Roll call analysis of vote on Ratification of Res. 125/08(Agricultural Export Tax Bill)

Analysis of Legislators’ Responses to original surveyexperiment

INCENTIVES TO VOTE ON EXPORT TAX BILL

1. Party discipline: given closed-list PR and strong partydiscipline:

Members of the FPV (ruling) caucus vote for export taxMembers of the opposition vote against export tax

2. Material concerns: given impact of export taxes oneconomic activity in local district

Probability of voting against export tax decreases with soyproduction in local districtProbability of voting for export increases with tax transfersto local district

FIGURE 2: SOY PRODUCTION AND VOTE BY CAUCUS

List of Defectors

FIGURE 3: PROB. OF VOTING FOR RES. 125/2008

Table 1

SURVEY EXPERIMENT

Received Wisdom: Given high education and strong priorslegislators should be:

Supportive of trade, irrespective of geography andlegislator’s leaningsNot malleable to framing effects

But we observe sizable framing effects . . .

Survey Design

FRAMING EFFECTS BY REGION

Legislators’ Responses Voters’ Responses

ANALYSIS OF SURVEY EXPERIMENT

LEGISLATORS’ MALLEABILITY TO FRAMING EFFECTS

Dimensionality:Legislators are sensitive to differential effects of trade onincome, employment and prices

Sensitivity to losers from trade:Expected direct and indirect losses from trade for localconstituents

All legislators affected by price concernsLegislators representing import competing regions moresensitive to employment effects

FIGURE 7: PROBABILITY OF RESPONDING “STRONGLY

AGREE” BY FRAME AND REGION

Note: Predicted probabilities and 90% confidence intervals of responding “Strongly Agree” derived from Model 1 inTable 2. * and ** denote statistically significant differences at the 10% and 5% levels, respectively.

Table 2

CONCLUSION

Roll call analysis of vote on Export Tax BillParty discipline: FPV legislators more likely to vote to ratifyResolution 125/08Material Concerns: Defections systematically associatedwith expected losses in soybean producing areas wherelegislator resides

Survey Experiment Findings:Dimensionality of Trade: Framing effects despite educationand priorsMaterial Concerns: Effect stronger for experimentalconditions highlighting expects of trade on losers in importcompeting areas

Heeding to the losers: Bring material concerns back intotrade politics

THANK YOU!

Heeding to the Losers from Trade.Evidence from Legislators’ Trade PolicyPreferences and Legislative Behavior

M. Victoria Murillo† Pablo M. Pinto‡

†ColumbiaUniversity

‡University of Houston

TRADE POLITICS

“BRINGING MATERIAL CONCERNS BACK IN”

Recent empirical studies downplay the role of economicself-interest on trade policy preference formation(O’Rourke and Sinnott 2001; Mayda and Rodrik 2005;Hiscox 2006; Hainmueller and Hiscox 2006)Growing consensus: Individual preferences towardsglobalization driven by cultural/ideological concerns andpsychological disposition (Hermann, Tetlock, and Diascro2001; Mansfield and Mutz 2009; Margalit 2012)However, there is a weak mapping from individualpreferences onto policy outcomes

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TABLE 1: PROBABILITY OF VOTING FOR THE EXPORT TRADE TAX BILL (PROBIT REGRESSION)

(1) (2) (3) (4) (5) Allied 2.864*** 2.790*** 2.921*** 1.676* (0.543) (0.596) (0.565) (0.859) Radical K 2.911*** 2.630*** 2.989*** 1.179*** (0.497) (0.500) (0.518) (0.432) FPV (a) 3.652*** 3.565*** 3.861*** 2.390*** 2.414*** (0.421) (0.412) (0.441) (0.220) (0.285) Soy Production -3.241** -3.437** -3.036*** -1.948 (1.348) (1.353) (1.143) (1.559) FPV x Soy prod. -1.927 (2.037) Import Competing Region 0.671* 0.730* 0.079 0.116 (0.388) (0.380) (0.235) (0.242) Public employment 0.010* 0.004 0.005 0.001 0.007 (0.005) (0.005) (0.005) (0.005) (0.005) District Magnitude 0.001 0.010* 0.003 -0.000 0.006 (0.006) (0.005) (0.006) (0.005) (0.005) Constant -3.264*** -2.618*** -2.959*** -0.955** -1.432*** (0.537) (0.567) (0.568) (0.372) (0.378) Party Caucus Caucus Caucus List Caucus pseudo R2 0.593 0.598 0.608 0.458 0.447 N 257 257 257 257 257 * p<0.10 ** p<0.05 *** p<0.01; robust standard errors in parentheses Notes: Dependent Variable = 1 if vote for Res. 125 = Yes, 0 otherwise.

(a) FPV = Pro-government (FPV, Allies and Radical K) in Model (5)

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TABLE 2: PROBABILITY OF LEGISLATORS’ SUPPORT FOR TRADE (ORDERED PROBIT REGRESSION)

(1) (2) (3) (4) Import Competing Region -0.267 -0.318 -0.385 -0.384

(0.430) (0.446) (0.490) (0.491)

Employment/Production frame -0.626* -0.589* -0.586* -0.586*

(0.327) (0.329) (0.332) (0.332)

M-comp x Production frame -0.266 -0.278 -0.293 -0.290

(0.538) (0.534) (0.535) (0.532)

Price frame -0.725** -0.708** -0.717** -0.720**

(0.323) (0.324) (0.322) (0.323)

M-comp x Price frame 0.248 0.252 0.244 0.250

(0.542) (0.550) (0.549) (0.543)

FPV Legislator -0.237 -0.239 -0.269

(0.211) (0.214) (0.289)

College or more 0.073 0.081 0.083

(0.220) (0.218) (0.217)

District Magnitude

0.002 0.002

(0.004) (0.004)

Soy production

-0.162 -0.123

(1.503) (1.583)

Vote for Export Taxes (Res. 125)

0.039

(0.293)

Cutpoints (κi) κ1 -2.976*** -3.047*** -3.027*** -3.020***

(0.373) (0.378) (0.378) (0.378)

κ2 -2.708*** -2.771*** -2.749*** -2.742***

(0.318) (0.354) (0.365) (0.369)

κ3 -2.612*** -2.672*** -2.650*** -2.644***

(0.306) (0.368) (0.382) (0.387)

κ4 -2.529*** -2.588*** -2.566*** -2.559***

(0.293) (0.358) (0.371) (0.378)

κ5 -1.368*** -1.419*** -1.397*** -1.391***

(0.256) (0.347) (0.370) (0.377)

pseudo-R2 0.048 0.054 0.054 0.055 N 200 200 200 200 * p<0.10 ** p<0.05 *** p<0.01; robust standard errors in parentheses. DV: Support for increasing trade = No response (0), strongly disagree (1), disagree (2), indifferent (3), agree (4), strongly agree (5) ! Return

APPENDIX 1: PRO-GOVERNMENT DEFECTORS

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THE COST OF DEFECTIONS

FDP Legislators who voted against the party line:5 legislators elected on a non-FPV Peronist List14 legislators left Congress, of which 7 pursued localpolitical careers

8 Radicales-K (allied to FPV) who voted against:All left FPV coalition; 3 re-elected on opposition list; 2 lostre-election on opposition list; 1 elected to Senate; 2returned to local political positions

IDEOLOGY BY EXPORT TAX VOTE

IDEOLOGY BY PARTY

SURVEY EXPERIMENT DESIGN

1. Price frame (63 legislators): “Hay quienes creen que aumentar el

comercio con otras naciones genera empleo y permite adquirir productos y

servicios mas baratos.” [”Many people believe that increasing trade with other

nations creates jobs and allows consumers to buy goods and services at lower

prices.”]

2. Production frame (65 legislators): “Hay quienes creen que

aumentar el comercio con otras naciones provoca desempleo y perjudica a los

productores argentinos.” [“Many people believe that increasing trade with other

nations creates unemployment and hurts Argentine producers.”]

3. Control (72 legislators): No introductionQuestion: Support for increasing trade“Ud. esta de acuerdo o en desacuerdo con que Argentina incremente su

comercio con otras naciones?” [“Do you agree or disagree with Argentina

increasing its trade with other nations?”]

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FIGURE 4: DISTRIBUTION OF PREFERENCES FOR

TRADE BY FRAME

FIGURE 5: DISTRIBUTION OF PREFERENCES FOR

TRADE BY FRAME AND CAUCUS

FIGURE 6: DISTRIBUTION OF PREFERENCES FOR

TRADE BY FRAME AND REGION

FIGURE A2.1: LEGISLATORS’ PREFERENCES FOR

TRADE BY FRAME AND EDUCATION

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PREFERENCES FOR TRADE BY FRAME AND

EDUCATION (VOTERS)

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FIGURE 1. FRAMING EFFECTS BY EDUCATION AND

REGION (PUBLIC OPINION SURVEY)

Ardanaz, Murillo and Pinto (IO 2013)

FIGURE 2. FRAMING EFFECTS BY SKILL AND REGION

(PUBLIC OPINION SURVEY)

Ardanaz, Murillo and Pinto (IO 2013)