Incumbents Beware: The Impact of Offshoring on Elections

• In Event: Labor and Firms in the Global Economy

Abstract

One of the most controversial aspects of modern-day globalization is offshoring – that is, when firms move their manufacturing operations abroad for reasons of comparative advantage. Despite the growing salience of offshoring for voters and politicians alike, it remains unclear what impact, if any, offshoring has on democratic elections. Using a difference-in-difference estimation strategy, I find evidence that voters punish governments when plants close to move abroad. Incumbent government parties lose more votes in municipalities where a local plant closed to relocate internationally between elections than in municipalities without an offshoring event. Voters punish both national and regional government parties and parties’ vote shares fall as the number of jobs losses increase. In coalition governments, voters punish only the largest party for offshoring.

Author

• Stephanie J. Rickard, London School of Economics