WAPOR Conference Berlin, September 19th, 2007

1. Preferences for protectionism:do economic factors really matter?Natalia Melgar (U de la República, Uruguay) Juliette Milgram (U de Granada, Spain)Máximo Rossi (U de la República, Uruguay) WAPOR Conference Berlin, September 19th, 2007

2. Introduction • Why public opinion doesn’t support free trade in general while economists always do? • What determines personal preferences on trade policy? • Which economic, cultural, social elements shape them? • If economic determinants matter, do people take into account national characteristics or their personal status? short-term or long-term? • Presentation: • Theoretical framework • Previous works and empirical strategy • Data • Stylized facts • Who supports protectionism? • Influence of country characteristics • Concluding remarks

3. Theoretical frameworkInternational trade models • The H-O model supposes complete costless factor mobility across sectors trade policy preference will differ among individuals depending on their relative factor endowment. (long term) • Workers will be pro-free-trade in labor-abundant societies and protectionist in labor-scarce • Ricardo-Viner model (R-V) that includes specific factors : trade policy preferences will depend on whether they are employed in an import-substituting or export industry (medium term) • New theories of international trade : Intra-industry trade is important between similar rich countries  low adjustment costs  richer countries are less protectionist toward richer countries • Proximity matters for bilateral trade: • transportation costs (freight, communication, information costs) • affinity between countries ( cultural, historical or political) do influence preferences of consumers. Rauch (2001) Disdier and Mayer (2005) • Results from other studies: • Mayda & Rodrik, EER,2005: ISSP, 23 countries and WVS; Strong evidence in favor of factor endowments model (education x GDP has a pro-trade impact) and less evidence in favor of specific trade model (working in sectors with CD has a negative impact on pro-trade attitude). • Scheve and Slaughter, JIE, 2001: for USA, preferences also depend on asset values. • This paper: do economic characteristics of the country play an important role?

4. 2. The data • The survey asks respondents (approximately 1400 in each country) their opinions on a great variety of issues, including trade preferences, immigration, patriotism, and politics, as well as demographic and socio-economic information • The question used in the survey to identify the respondent’s trade preferences is: • “How much do you agree or disagree with the following statement: “respondent's country” should limit the import of foreign products in order to protect its national economy?” • Agree: 28,9% in Sweden to 81,9 from Arabs from Israel. • Disagree: below 30% except for Switzerland (43%), Sweden (35%), Norway (36%) and Denmark (48%).

5. TABLE 1: Answers by country

6. Share of persons supporting protectionism and GNI per capita

7. Share of persons supporting protectionism and trade policy

8. Share of persons supporting protectionism and import penetration

9. 4. ResultsA. Explaining support for protectionismat the national level • We focus only on country characteristics and explain the Share of population supporting protectionism • Protec = agree or agree strongly that “respondent’s country” should limit the import of foreign products in order to protect its national economy. • logarithmic form • ln(1+share of protec)=f(country characteristics compared to the worlds average)

10. TABLE 3: National support for protectionism While this economic determinants seem to be important at the national level, they are not always determinant at the individual level.

11. Empirical strategyExplaining individual support for protectionism • How individual characteristics and country characteristics affect favourable opinions towards protectionism? • We use 2003 International Social Survey Program (ISSP): 34 countries which includes high and middle income countries and small and big ones. • Ordered probit model • The dependent variable : 3 being agree or agree strongly, 2 being neither agree nor disagree and 1 being disagree or disagree strongly • We include a wide range of indicators of country performance relative to the world average (GDPpc, X/GDP, M/GDP, TRI, Market access) • Specifications tested: • without country characteristics Pseudo R2 = 0.05 • with dummies by country Pseudo R2 = 0.07 • with country characteristics (Import penetration, export penetration, GNI pc, etc) Pseudo R2 = 0.07 • By groups of countries (big, small, EU, non EU, high/middle income, Agriculture, Services, Industry) • Impact of the specialization pattern • Impact of trade policy on individual opinions. • Country characteristics play a role? YES • Individual characteristics have the same influence in all models

12. a. Who supports protectionist measures? • Ideology and religion. • religion + • right - • Patriotism, nationalism and chauvinism. • Attach (very close to country) NOT SIGNIFICANT • Pride (would rather be a citizen of RC rather than of any other country in the world) + • Natsup (RC is a better country than most other countries) + • Pride2 (RC should follow its own interests, even if this leads to conflicts with other nations) + • Proud of democracy works / economic achievement NOT SIGN • Employment status. • Active NOT SIGN • Unemployed NOT SIGN • employed-full time - • work for government NOT SIGN • public owned firm NOT SIGN • private firm, NOT SIGN • Other • Age + • Gender (0 male 1 female) + • Currently member of trade union - • Not married NOT SIGN

13. Who supports protectionist measures?Influence of individual economic characteristics • Years of Education – • Education *GDPpc/GDPpcworld: - (H-O) • income - • social status. • topbot self-placement in a scale of income from 1 (lowest) to 10 (highest). always – but lower effects in high income countries • Feel poor in high income countries + (H-O) • Feel rich in high income countries NOT SIGN • Feel poor in middle income countries - (H-O) • Feel rich in middle income countries – (contradiction with H-O?) Variables that mostly influence preference formation are social status, skills, values and nationalism

14. b. Influence of country characteristics • Size of the country: NOT SIGN • GNI pc – (IIT) but NOT SIGN for small and EU countries • Macroeconomic environment • Average growth + for big and EU countries • Inflation rate + • Trade • Export (% of GDP): - (in particular in SMALL countries) • Import (% of GDP): + (in particular in EU countries) • Proximity (language, localisation): Not clear • Structure of production • important share of production in services + for non EU countries • Trade policies: • Protectionist + for middle income countries but not sign for others • Market access + for small countries and non EU • Specific trade models • Working in a sector with Comparative Advantage : NOT SIGN • Working in a sector with Comparative Disadvantage: +

15. Summary • Individual characteristics explain great part of the differences among individuals • non-economic characteristics such as national pride, nationalism, religiosity, political affiliation, age, have a great impact on trade policy preferences. • Pro-trade preferences are positively and robustly correlated with an individual’s level of human capital or a higher social status independently of the income level of the country • People who feels poor in rich countries are more likely to be protectionist what supports the H-O hypothesis. For people with higher social status, they don’t seem to consider their own status as relevant for this question. • Country Characteristics • People living in richer countries are more likely to disagree with protectionist measures( intra-industry explanation) . • Important share of production in services (mostly non-tradable goods) influences positively protectionist attitudes • Export intensity and market access are important in small countries • Import penetration rate is important for EU but trade policy is not relevant • Attitude are biased towards protectionism since working in a sector with CD matters but CA does not.