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1

3 horns of Rodrik's globalisation trilemma

1. Full international economic integration
2. Nation state
3. Democracy

2

What does hyper-globalisation require?

1. No transaction costs associated w/national borders
2. Elimination of all tariff/non-tariff trade barriers and harmonisation of regulation (e.g. in consumer safety)

3

Evidence that world economy today is very globalised?

Fouqin and Hugot (2016)

Value of global exports as % of GDP more than doubled in last 3 decades

4

Evidence 'macro constraint' of globalisation not particularly strong for most developed economies

USA consistently able to borrow cheaply, despite large deficits (Mosley 2005)

5

Evidence on changes in OECD tax revenues as % of GDP in last 3/4 decades

Tax revenues as % of GDP not declined over last 3 or 4 decades (OECD 2018)

6

Evidence on effective tax rates on capital and corporate profits in recent decades

1. Devereux et al (2008):
(i) Decline in effective tax rates on capital and corporate profits

2. Swank and Steinmo (2002)
(i) Top statutory capital tax rates decreased in most countries since 80s
(ii) Caveat – such cuts accompanied by broadening of tax base, leaving effective capital tax rates almost unchanged 1981-95

7

Race to bottom hypothesis

Economic openness forces countries into competition, which implies a convergence of national policies (e.g. over corporate tax rates)

8

Rodrik (1997)

IMPACT OF ECONOMIC OPENNESS ON GVT SPENDING

1. strong positive association between trade openness and LEVEL of spending

2. negative association between trade openness and CHANGES in spending

9

Evidence of strong positive association between trade openness and level of spending

Rodrik (1997)

10

Evidence that framing effects may make surveys unreliable guides to extent of trade opposition

Hiscox (2006)

11

What % of respondents, on average, have anti-trade views in a cross-national survey? Source?

~60% (Mayda and Rodrik 2003)

12

What does specific factors trade model predict about globalisation attitudes?

EXPORT ORIENTED/IMPORT-COMPETING

1. Globalisation attitudes shaped by sector of employment

2. Because trade benefits those employed in export-oriented sectors and hurts those in importing-competing sectors

13

What does factor endowments trade model predict about globalisation attitudes?

FACTOR ABUNDANCE

1. Globalisation attitudes shaped by level of human capital (in developed economies)

2. Because trade benefits owners of factors of production w/which economy relatively well-endowed and hurts others

14

General evidence that self-interest rarely enters into formation of policy opinions because citizens find it hard to link personal economic situations to public policies

Sears and Funk (1990)

15

Why does self-interest rarely enter into formation of policy opinions, generally? (Sears and Funk 1990)

Citizens find it hard to link personal economic situations to public policies

16

Evidence that trade policies generally anti-free trade?

1. Rodrik (1995)

“trade policies universally biased against (rather than in favour of) trade”

2. Busch and Mansfield (1995)

"free trade is rare"

17

Fouqin and Hugot (2016)

Value of global exports as % of GDP more than doubled in last 3 decades

18

..... and ..... (.....)

Value of global exports as % of GDP ..... in last ..... decades

Fouqin and Hugot (2016)

Value of global exports as % of GDP more than doubled in last 3 decades

19

OECD (2018)

Tax revenues as % of GDP not declined over last 3 or 4 decades

20

Tax revenues as % of GDP not declined over last 3 or 4 decades

OECD (2018)

21

Value of global exports as % of GDP more than doubled in last 3 decades

Fouqin and Hugot (2016)

22

Sears and Funk (1990)

WHY SELF-INTEREST DOESN'T ENTER INTO POLICY OPINIONS

Generally, self-interest rarely enters into formation of policy opinions because citizens find it hard to link personal economic situations to public policies

23

“trade policies universally biased against (rather than in favour of) trade”

Rodrik (1995)

24

Rodrik (1995)

“trade policies universally biased against (rather than in favour of) trade”

25

Why is hyper-globalisation incompatible with the nation state and democracy simultaneously?

1. If keep nation state, must significantly restrict scope of democratic politics
(i) Reason – to ensure coordination/harmonisation, citizens’ right to decide across many policy areas curtailed

2. If keep democracy, politics can’t take place at level of nation state
(i) Reason – guaranteeing global coordination would require politics to be conducted at global level w/global federal government

26

Mosley (2005)

1. Substantial cross-national diversity in terms of:
(i) Overall government size
(ii) Distribution of spending across programmatic areas
(iii) Structure of taxation

2. Globalisation pressures (esp. capital market openness) cause 'macro' constraint for countries
(i) Common trend towards lower average rates of inflation and smaller fiscal deficits in more globalised economies

3. 'Macro constraint' of globalisation not particularly strong for largest developed economies
(i) e.g. USA consistently able to borrow cheaply, despite large deficits

27

Beramendi and Rehm (2007)

Evidence of shift from taxation of capital to taxation of labour and consumption, due to globalisation

28

Evidence of general views towards trade in cross-national survey?

Mayda and Rodrik (2003)

Generally, ~60% of respondents have anti-trade views

29

Mayda and Rodrik (2003)

TRADE VIEWS

1. Generally, ~60% of respondents in cross-national surveys have anti-trade views

2a. Trade preferences strongly correlated w/trade exposure of sector of employment
2b. Individuals in non-traded sectors = most pro-trade

30

Evidence supporting specific factors model

Mayda and Rodrik (2003)

1a. Trade preferences strongly correlated w/trade exposure of sector of employment
1b. Individuals in non-traded sectors = most pro-trade

31

Counter-evidence to specific factors model

1. Mansfield and Mutz (2009)

(i) Use more comprehensive measures of industries
(ii) V. little support for prediction that globalisation attitudes shaped by sector of employment

32

Problems with Mayda and Rodrik's (2003) evidence supporting specific factors model?

(i) Locate respondents by industry via questions about type of industry employed in
(ii) But coding responses into industries v. difficult due to vagueness of responses
(iii) Many assigned to multiple overlapping sectors due to inadequate information

33

Mansfield and Mutz (2009)

1. Little evidence that globalisation attitudes shaped by sector of employment

2. Strong support for socio-tropic basis of trade attitudes (not self-interest)

3. In/out-group attitudes (ethnocentrism) and world view (isolationism) strongly associated with increased hostility to free trade

4. Education has marked effect on trade attitudes
(i) Those with a graduate school education 65% more likely to support trade compared to high-school educated
(ii) BUT effect disappears after controlling for domestic ethno-centrism and isolationism

5. Local information (e.g. about trade-related job losses) = key influence on formation of national-level collective perceptions

34

Evidence supporting factor endowments model

Scheve and Slaughter (2001)
(i) US evidence that high-skilled more pro-trade

35

Counter-evidence to factor endowments model?

Margalit (2009)

1. Cross-national survey data using broader universe of countries

2a. Little evidence of relationship between skill-level and pro-trade attitudes as function of country’s skill-abundance
2b. High skilled consistently more in favour of free trade everywhere (regardless of skill-abundance of country)

36

Margalit (2009)

EVIDENCE AGAINST FACTOR ENDOWMENTS + FOR CULTURAL ANXIETIES

1. Cross-national survey data using broader universe of countries

2a. Little evidence of relationship between skill-level and pro-trade attitudes as function of country’s skill-abundance
2b. High skilled consistently more in favour of free trade everywhere (regardless of skill-abundance of country)

3. Sense of loss from free trade reflects anxiety about cultural changes associated with increased economic openness (to a large extent)

37

Evidence that education impacts trade attitudes

Mansfield and Mutz (2009)

1. Those with graduate school education 65% more likely to support trade compared to high-school educated

2. Caveat - effect disappears after controlling for domestic ethno-centrism (in/out group attitudes) and isolationism (world view)

38

Evidence - are trade attitudes shaped by self-interest or sociotropic concerns?

Mansfield and Mutz (2009)

Strong support for sociotropic basis of preferences

39

Mansfield and Mutz (2009)

1. Education has marked effect on trade attitudes

2. Those with ..... are .....% more likely to support trade compared to .....

Mansfield and Mutz (2009)

1. Education has marked effect on trade attitudes

2. Those with a graduate school education are 65% more likely to support trade compared to high-school educated

40

Scheve and Slaughter (2001)

US evidence that high-skilled more pro-trade

41

US evidence that high-skilled more pro-trade

Scheve and Slaughter (2001)

42

USA consistently able to borrow cheaply, despite large deficits

Mosley (2005)

43

Hiscox (2006)

Framing effects may make surveys unreliable guides to extent of trade opposition

44

Evidence that globalisation has caused a shift in type of taxes levied

Beramendi and Rehm (2007)

Evidence of shift from taxation of capital to taxation of labour and consumption, due to globalisation

45

Evidence that cultural preferences drive trade attitudes

1. Mansfield and Mutz (2009)
(i) Education has marked effect on trade attitudes
(ii) But effect disappears once domestic ethno-centrism and isolationism world view controlled for

2. Margalit (2009)
(i) Sense of loss from free trade reflects anxiety about cultural changes associated with increased economic openness (to a large extent)

46

Hainmueller and Hiscox (2006)

EFFECT OF EDUCATION ON TRADE VIEWS MECHANISMS = WORLD VIEW + ECONOMIC KNOWLEDGE

1a. More educated less prone to nationalist and anti-foreigner sentiment associated w/protectionist support
1b. Mechanism – education teaches students to evaluate things in different way and socialises students into more tolerant, cosmopolitan world view

2a. Economic knowledge strongly associated with university education
2b. Economic knowledge associated with more pro-trade views

47

Mechanism Hainmueller and Hiscox (2006) argue is response for finding that more educated less prone to nationalist and anti-foreigner sentiment associated?

Mechanism – education teaches students to evaluate things in different way and socialises students into more tolerant, cosmopolitan world view

48

Evidence that education affects culture preferences associated with protectionist support?

Hainmueller and Hiscox (2006)

More educated less prone to nationalist and anti-foreigner sentiment associated w/protectionist support

49

Why are women more protectionist than men, on average?

Burgoon and Hiscox (2004)

College-educated men more likely than women to be exposed to economic trade arguments due to differences in course choice

50

Busch and Mansfield (1995)

"Free trade is rare"

51

"Free trade is rare"

Busch and Mansfield (1995)

52

Margalit (2011)

POLITICAL IMPACT OF CITIZENS' GLOBALISATION ATTITUDES

1. Trade-related job losses have significant negative effect on support for incumbent

2. Job losses due to economic openness has uniquely strongly electoral response

53

Why do job losses caused by economic openness have uniquely strong electoral response? (Margalit 2011)

1. Intense media coverage
2. Economic nationalism and ethno-centrism

54

Evidence that voters punish incumbent due to impact of globalisation

Margalit (2011)

1. Trade-related job losses have significant negative effect on support for incumbent

55

Walter (2017)

GLOBALISATION HAS HETEROGENEOUS EFFECTS ON WELFARE SUPPORT

1. Data – cross-national survey evidence from 16 European countries

2. Impact of globalisation conditional on skill level and exposure to international competition
(i) Globalisation winners (high-skill + exposed) – globalisation decreases social protection demands
(ii) Globalisation losers (low-skill + exposed) – globalisation increases social protection demands
(iii) Sheltered from international competition – domestic developments more salient than globalisation

56

Evidence that globalisation has heterogeneous impact on demands for social protection

Walter (2017)

1. Data – cross-national survey evidence from 16 European countries

2. Impact of globalisation conditional on skill level and exposure to international competition
(i) Globalisation winners (high-skill + exposed) – globalisation decreases social protection demands
(ii) Globalisation losers (low-skill + exposed) – globalisation increases social protection demands
(iii) Sheltered from international competition – domestic developments more salient than globalisation

57

Why do Iversen and Cusack (2000) find no impact of globalisation on welfare state demand, according to Walter (2017)

1. Globalisation has heterogeneous effects

2. Iversen and Cusack don't segment population

58

Walter (2010)

SUPPORTS COMPENSATION THESIS

1. Tests compensation thesis along entire causal chain at micro-level using Swiss data

2. Substantial supporting evidence

3. globalisation losers feel more insecure, and this leads to stronger preferences for welfare state expansion, which increases probability of voting for left

59

Micro-evidence supporting compensation thesis?

Walter (2010)

1. Tests compensation thesis along entire causal chain at micro-level using Swiss data

2. Substantial supporting evidence

3. globalisation losers feel more insecure, and this leads to stronger preferences for welfare state expansion, which increases probability of voting for left

60

Macro evidence supporting compensation thesis?

Rodrik (1997)

Cross-national evidence that greater economic openness associated w/higher levels of welfare state spending

61

Busemeyer and Garritzmann (2018)

GLOBALISATION INCREASES EDUCATION DEMANDS

1. Data – micro-level individual survey evidence 17 OECD countries

2. Globalisation increases individual-level support for government spending on education, but not unemployment insurance

3. Theoretical explanation:
(i) Self-interest – individuals seek active interventions (education/training) to avoid job loss by updating skills
(ii) Sociotropic perceptions – individuals view investments in education as more effective societal response to globalisation

62

Evidence that globalisation increases demands for particular types of social policy

Busemeyer and Garritzmann (2018)

1. Data – micro-level individual survey evidence 17 OECD countries

2. Globalisation increases individual-level support for government spending on education, but not unemployment insurance

3. Theoretical explanation:
(i) Self-interest – individuals seek active interventions (education/training) to avoid job loss by updating skills
(ii) Sociotropic perceptions – individuals view investments in education as more effective societal response to globalisation

63

Why does globalisation increase individual-level support for education spending? (Busemeyer and Garritzmann 2018)

Theoretical explanation:

(i) Self-interest – individuals seek active interventions (education/training) to avoid job loss by updating skills
(ii) Sociotropic perceptions – individuals view investments in education as more effective societal response to globalisation

64

Why do Busemeyer and Garritzmann (2018) find no evidence that globalisation increases demands for unemployment insurance?

1. Due to need for survey data that asks about preferences for different types of social spending, unable to control for skill-level or exposure to international competition in their study

2. Implication –heterogeneous effects might mean overall impact ‘averages out’ in large-scale surveys

65

Busemeyer (2009)

EVIDENCE SUPPORTING EFFICIENCY THESIS

1. Problems w/existing literature:
(i) Most studies end in mid 90s due to data limitations (but if processes of globalisation only gained momentum from 80s, then data up to 90s unlikely to reveal long-term effects)
(ii) Most studies examine cross-sectional, not over-time, data (but if globalisation a dynamic process, makes more sense to analyse association between changes in globalisation and spending, not levels)

2. Data - 21 OECD countries 1980-2004

3. Results:
(i) From 1990 onwards, strong and statistically significant robust association between increases in economic openness and decreases in public spending

66

Evidence supporting efficiency thesis

1. Busemeyer (2009)

Strong and statistically significant robust association between increases in economic openness and decreases in public spending from 1990 onwards

2. Rodrik (1997)

Negative association between changes in globalisation and spending

67

What problems does Busemeyer (2009) identify with existing literature testing impact of globalisation on public spending?

(i) Most studies end in mid 90s due to data limitations (but if processes of globalisation only gained momentum from 80s, then data up to 90s unlikely to reveal long-term effects)

(ii) Most studies examine cross-sectional, not over-time, data (but if globalisation a dynamic process, makes more sense to analyse association between changes in globalisation and spending, not levels)

68

How can evidence supporting both compensation and efficiency theses be reoconciled?

1. Both could be true (Busemeyer and Garritzmann 2018):

(i) Compensation thesis – globalisation leads to increased demands for social protection among certain groups
(ii) Efficiency thesis – could also be true that politicians more constrained in responding to these demands, due to globalisation


2. Globalisation = dynamic variable and its nature and/or intensity may change over time (Busemeyer 2009)

69

Globalisation = dynamic variable and its nature and/or intensity may change over time

Busemeyer (2009)

70

If governments perceived by voters to be constrained by international market, economic integration may decrease economic voting

Hellwig and Samuels (2007)

71

Hellwig and Samuels (2007)

If governments perceived by voters to be constrained by international market, economic integration may decrease economic voting

72

Paley (2017)

FALLACY OF RODRIK'S GLOBALISATION TRILEMMA

1. Globalisation impacts content of democratic politics by shrinking policy space that is economically feasible
2. But does not impact democratic process per se
3. Rodrik conflates political ‘process’ w/’content’

73

FALLACY OF RODRIK'S GLOBALISATION TRILEMMA

1. Globalisation impacts content of democratic politics by shrinking policy space that is economically feasible
2. But does not impact democratic process per se
3. Rodrik conflates political ‘process’ w/’content’

Paley (2017)

74

Ansell (2010)

1. Positive cross-national association between economic globalisation and education spending
2. Problem - causal mechanism under-developed

75

1. Positive cross-national association between economic globalisation and education spending
2. Problem - causal mechanism under-developed

Ansell (2010)

76

1. What is the limitation of Ansell's (2010) finding that education spending is positively associated with economic globalisation?

2. Which study addresses this and how?

1. Cross-sectional association at macro-level, but causal mechanism under-developed

2a. Busemeyer and Garritzmann (2018)
2b. Use micro-level individual survey evidence from 17 OECD countries

77

Burgoon and Hiscox (2004)

College-educated men more likely than women to be exposed to economic trade arguments due to differences in course choice

78

College-educated men more likely than women to be exposed to economic trade arguments due to differences in course choice

Burgoon and Hiscox (2004)

79

Evidence of shift from taxation of capital to taxation of labour and consumption, due to globalisation

Beramendi and Rehm (2007)

80

EFFECT OF EDUCATION ON TRADE VIEWS MECHANISMS = WORLD VIEW + ECONOMIC KNOWLEDGE

1a. More educated less prone to nationalist and anti-foreigner sentiment associated w/protectionist support
1b. Mechanism – education teaches students to evaluate things in different way and socialises students into more tolerant, cosmopolitan world view

2a. Economic knowledge strongly associated with university education
2b. Economic knowledge associated with more pro-trade views

Hainmueller and Hiscox (2006)

81

What puzzle is solved by Margalit's finding that the sense of loss from free trade reflects anxiety about cultural changes associated with increased economic openness (to a large extent)?

Support by economic losers from free trade of pro-trade yet socially conservative parties

82

Why is there evidence that the economic losers of free trade support pro-trade, yet socially conservative parties?

Margalit (2009)

Sense of loss from free trade reflects anxiety about cultural changes associated with increased economic openness (to a large extent)

83

Burgoon (2012)

INEQUALITY AND ANTI-GLOBALISATION BACKLASH BY PARTIES

1. Results:
(i) Inequality tends to increase parties' anti-globalisation positions
(ii) Effect moderated by generous redistributive policies

2. Explanation - inequality leads to feelings of insecurity and deprivation, which results in scape-goating of out-groups that manifests itself in an anti-globalisation backlash

84

INEQUALITY AND ANTI-GLOBALISATION BACKLASH BY PARTIES

1. Results:
(i) Inequality tends to increase parties' anti-globalisation positions
(ii) Effect moderated by generous redistributive policies

2. Explanation - inequality leads to feelings of insecurity and deprivation, which results in scape-goating of out-groups that manifests itself in an anti-globalisation backlash

Burgoon (2012)

85

Evidence that increased inequality leads to an anti-globalisation backlash by parties

Burgoon (2012)

INEQUALITY AND ANTI-GLOBALISATION BACKLASH BY PARTIES

1. Results:
(i) Inequality tends to increase parties' anti-globalisation positions
(ii) Effect moderated by generous redistributive policies

2. Explanation - inequality leads to feelings of insecurity and deprivation, which results in scape-goating of out-groups that manifests itself in an anti-globalisation backlash

86

Distinguish types of globalisation

1. Economic globalisation (e.g. economic openness, trade flows, FDI)

2. Social globalisation (increased inter-connectedness of people globally, incl. greater information flows, communication and cultural convergence)

3. Political globalisation (increasing political inter-connectedness, incl. greater importance of international organisations like the UN and WTO, and other supra-national political partnerships)

87

Kaiser (2009)

Globalisation can have indirect effect on party positions, by creating common ideological trends

88

Globalisation can have indirect effect on party positions, by creating common ideological trends

Kaiser (2009)

89

Meinhard and Potrafke (2012)

IMPACT OF SOCIAL GLOBALISATION ON GOVERNMENT SPENDING

1. Social globalisation has positive effect on government spending

2. Reason – when people more globally inter-connected, the more they observe government size in other countries and so demand more domestic spending

90

IMPACT OF SOCIAL GLOBALISATION ON GOVERNMENT SPENDING

1. Social globalisation has positive effect on government spending

2. Reason – when people more globally inter-connected, the more they observe government size in other countries and so demand more domestic spending

Meinhard and Potrafke (2012)

91

Ward et al (2015)

Economic globalisation leads to party convergence on economic policies due to the constraints of globalisation (which reduce available policies)

92

Economic globalisation leads to party convergence on economic policies due to the constraints of globalisation (which reduce available policies)

Ward et al (2015)

93

1. Evidence that globalisation leads to party platform convergence

2. Why?

1. Ward et al (2015)

2. Due to the constraints of globalisation (which reduce available policies)

94

Swank and Steinmo (2002)

(i) Top statutory capital tax rates decreased in most countries since 80s
(ii) Caveat – such cuts accompanied by broadening of tax base, leaving effective capital tax rates almost unchanged 1981-95

95

(i) Top statutory capital tax rates decreased in most countries since 80s
(ii) Caveat – such cuts accompanied by broadening of tax base, leaving effective capital tax rates almost unchanged 1981-95

Swank and Steinmo (2002)

96

Iversen and Soskice (2019)

CONTINUED VOC DIVERSITY IN FACE OF GLOBALISATION

1. Limited mobility of skilled knowledge-based workforces in ACDs
2. Advanced companies can’t credibly threaten to move
3. ACDs have incentive to support globalisation

GLOBALISATION DOESN'T CONSTRAIN ACDs

1. Effective capital tax rates unchanged and tax composition = political choice
2. Political power of multi-national companies = weak (limited scope for collection action and rely on geographically-rooted workforces)

PUZZLE OF RISING INEQUALITY WITHOUT REDISTRIBUTION

1. Top-end: concentrated gains in income at top, but also sharp increases in taxes paid (overall burden of taxes not shifted)
2. Bottom-end: new middle-class = secure and old middle-class oppose redistribution to 'undeserving poor' and immigrants

97

CONTINUED VOC DIVERSITY IN FACE OF GLOBALISATION

1. Limited mobility of skilled knowledge-based workforces in ACDs
2. Advanced companies can’t credibly threaten to move
3. ACDs have incentive to support globalisation

Iversen and Soskice (2019)

98

PUZZLE OF RISING INEQUALITY WITHOUT REDISTRIBUTION

1. Top-end: concentrated gains in income at top, but also sharp increases in taxes paid (overall burden of taxes not shifted)
2. Bottom-end: new middle-class = secure and old middle-class oppose redistribution to 'undeserving poor' and immigrants

Iversen and Soskice (2019)

99

GLOBALISATION DOESN'T CONSTRAIN ACDs

1. Effective capital tax rates unchanged and tax composition = political choice
2. Political power of multi-national companies = weak (limited scope for collection action and rely on geographically-rooted workforces)

Iversen and Soskice (2019)

100

Reason that it is difficult to attribute any changes in tax composition or tax rates to globalisation?

Confounding variable = technological change and digital economy