Economic Shocks and Changing Political Representation: Are Labor Unions the Missing Link?

• In Event: Trade and Domestic Institutions

Abstract

The dramatic rise in import competition from developing countries since the 1990s has given new urgency to explain political responses in the United States and other advanced economies. Recent scholarship has cataloged many reduced-form effects of trade shocks. Far less attention has been paid to the problem of unbundling the causal paths through which economic shocks affects political responses. In this paper, we assess the possibility that an important part of the political effect works through local labor unions that shape the relative strength of workers in the policymaking process. We study the US House of Representatives using a recently developed semi-parametric mediation model. The model operates by leveraging two distinct sources of exogenous variation: an instrument for import competition and a novel instrument for district-level union membership based on history and geography. We find that import competition lowers district-level unionization and that weaker unions lead to less legislative responsiveness. The union channel represents a large fraction of the treatment effect of import exposure on legislative votes.

Author

• Michael Becher, IE UNIVERSIDAD