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Seminarios académicos y conferencias

Emanuel Ornelas, Sao Paulo School of Economics – FGV

"Labor Unions and the Electoral Consequences of Trade Liberalization"

26 Noviembre 2020 - 17:00 hrs.

Vía Zoom

Abstract: We show that the Brazilian trade liberalization from the 1990s led to a permanent relative decline in the vote share of left-wing presidential candidates in the most affected regions. This happened even though the incumbent party during the reform belonged to the center-right and the left was identified with protectionist policies. To rationalize this response, we consider a new institutional channel for the political effects of trade shocks: the weakening of labor unions due to a reduction in manufacturing and, in Brazil, formal employment. We show that proxies for union strength|such as the number of workers directly employed by unions and union density|indeed declined in regions that suffered relatively larger increases in exposure to foreign competition. Finally, we show that the effect of the trade liberalization on the vote share of the left is stronger in regions that had higher union presence before the reform. These findings are consistent with the hypothesis that tariff cuts during the trade reform reduced the vote share of the left partly through the weakening of labor unions. This institutional effect is fundamentally different from the individual-level responses, motivated by economic and identitary concerns, that have been considered in the literature.