Hybrideseminar – Politically motivated trade protection

This paper shows that the Electoral College system used to elect US presidents distorts US federal policies, giving rise to distributional effects along supply chains. Using detailed data on US trade policies since the 1980s, we show that during first terms — when the executive can be re-elected — the level of trade protection granted to an industry depends on its importance in states expected to be swing in the next presidential elections. We next examine the effects of politically motivated trade protection, exploiting changes in the identity of swing states across terms and heterogeneous exposure to these political shocks across industries. We find that swing-state politics generates winners and losers: it fosters employment growth in protected and upstream industries, but hampers employment growth in downstream industries. Our estimates imply a negative overall impact of politically motivated trade protection on US jobs.