DP12897 | Globalization, Government Popularity, and the Great Skill Divide

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How does international trade affect the popularity of governments and leaders? We provide the first large-scale, systematic evidence that the divide between skilled and unskilled workers worldwide is producing corresponding differences in the response of political preferences to trade shocks. Using a unique data set including 118 countries and nearly 450,000 individuals, we find that growth in high skill intensive exports (of goods and services) increases approval of the leader and incumbent government among skilled individuals. Growth in high skill intensive imports has the opposite effect. There is no effect on political approval among the unskilled. To identify exogenous variation in international trade, we exploit the time-varying effects of air and sea distances in bilateral trade flows. Our findings suggest that the political effects of international trade differ with skill intensity and that skilled individuals respond differently from their unskilled counterparts to trade shocks.