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Factor or industry cleavages in trade policy an empirical analysis of the stolper samuelson theorem
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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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Factor or industry cleavages in trade policy an empirical analysis of the stolper samuelson theorem

Factor or Industry Cleavages in Trade Policy?

An Empirical Analysis of the Stolper-Samuelson Theorem

Jalmar DeDios

Mariko Schaper


Variables

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


Author motivation

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


Argument

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


Hypothesis

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.


Research sample

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


Empirical results

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.


Criticisms

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


Conclusions

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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