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Factor or Industry Cleavages in Trade Policy?

Factor or Industry Cleavages in Trade Policy? An Empirical Analysis of the Stolper-Samuelson Theorem. Jalmar DeDios Mariko Schaper. Research Question. Variables. Do factors of production or industry of employment effect personal preferences on the position of trade policy?.

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Factor or Industry Cleavages in Trade Policy?

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  1. Factor or Industry Cleavages in Trade Policy? An Empirical Analysis of the Stolper-Samuelson Theorem Jalmar DeDios Mariko Schaper

  2. Research Question Variables Do factors of production or industry of employment effect personal preferences on the position of trade policy? • Dependent Variable: • Preferences on trade policy • Independent Variables: • Factors of production • Skilled and unskilled laborers • Industry of employment

  3. Author Motivation • Academic Debate: • Preferences that effect positions on trade policy are related to either: • Factors of Production • Stolper-Samuelson Theorem • Industry of Employment • Specific Factors Model • Ricardo-Viner • Proposed by Beaulieu: • Partial Mobility Model • Hill and Mendez

  4. Argument • Early empirical analysis proves industry of employment to effect personal preferences • Recent research provides evidence that factors of production influence personal preferences • Beaulieu argues that a combination of both theories help to better explain what variables have an effect on preferences on trade policy

  5. Hypothesis • Beaulieu expects to prove that within factors of production, through levels of education, skilled laborers will favor trade over unskilled laborers because they are more mobile • Expects to also prove that the industry affiliation will also have an effect • “A comprehensive model be used to explain the probability of supporting the FTA as a function of human capital (or skill category) and industry affiliation” Beaulieu 120.

  6. Research Sample • Based off of results from 1988 Canadian referendum on FTA (US-Canada Free Trade Agreement) • Dependent variable measured in support of FTA; support = 1 • Factors of production research, includes: • Level of education/ level of skill • Age • Region • Member of union/party affiliation/constant • Specific-factors (industry) research, includes: • Industry affiliation • Generic occupations • Predicted industry effect • Age • Region • Member of union/PC party voter/constant

  7. Empirical Results • Beaulieu finds that factors of production have a robust effect (*) on the preferences on the FTA, but also finds that industry of employment has a significant effect on the position on the FTA as well.

  8. Criticisms • Because of the CNES does not include the respondents’ industry of employment, industry mapping was done, which leaves room for error. Industry mapping leads to bias: • Under-representation of some industries (manufacturing industries) • Effect of the FTA on each specific occupation/industry • Omitted categories

  9. Conclusions • Factors of production-defined by skill level- were important determinants of voters’ positions on the FTA. The industry of employment also had a statistically significant effect on preferences toward the FTA in some specification of the model. • Factors of productions having significant effects on trade policy is in contrast to studies by Irwin and Magee; industry of employment also helping to determine preferences on trade policy supports findings by Irwin and Magee. • These findings suggest that factors in production (labor) are mobile between sectors, but not mobile enough that preferences are completely detached from industry of employment. • Supports a Partial-Mobility model

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