GEP Research Paper 03/38
Trade, Turnover and Tithing
Christopher Magee, Carl Davidson and Steven J. Matusz
Abstract
This paper develops a political economy model to test the proposition that the effect of international trade on the distribution of income is systematically related to the extent of labor-market turnover. The model reveals that trade benefits the abundant factor and hurts the scarce factor regardless of where those factors are employed if turnover is high, but benefits factors in exporting industries and harms those in import-competing industries when turnover is low. We test these predictions using data on campaign contributions given by industry-specific political action committees to congressional representatives who subsequently voted for or against trade-liberalizing legislation. We find empirical evidence in favor of the model's predictions.
Issued in November 2003.
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