IZA DP No. 13026: Globalization, Government Popularity, and the Great Skill Divide
How does international trade affect the popularity of governments and leaders? The recent backlash against globalization renders this question extremely topical. Yet, most previous work has looked for political effects of aggregate trade flows without decomposing into particular types of products. We provide the first large-scale, global evidence that trade shocks affect political approval and show that what matters is the match between workers' skills and the characteristics of goods traded. Using a unique data set including 118 countries, we show that growth in high skill intensive exports increases approval of incumbents among skilled individuals. Growth in high skill intensive imports has the opposite effect. High skill intensive trade has no discernible effect on the unskilled. To identify exogenous variation, we exploit the time-varying effects of air and sea distances on bilateral trade flows. Our findings help explain responses to trade of economic elites in developing and middle income countries.