Voting on a Trade Agreement: Firm Networks and Attitudes Toward Openness
We exploit a natural experiment to study the extent to which popular attitudes toward trade are driven by economic fundamentals. In 2007, Costa Rica put a free trade agreement (FTA) to a national referendum. With a single question on the ballot, 59% of Costa Rican adult citizens cast a vote on whether they wanted an FTA with the United States to be ratified, or not. We merge disaggregated referendum results with employer-employee data, customs and balance-sheet data, firm-to-firm transactions data, and data on household composition and expenditures. We document that a firm's exposure to the FTA, directly and via input-output linkages, significantly influences the voting behavior of its employees. This effect is greater for voters who are aligned with pro-FTA political candidates. We find that import competition plays a role in explaining votes against openness, and that within-industry heterogeneity is key in explaining votes, as compared with sector-level exposure. We also show that citizens considered the expected decrease in consumer prices when exercising their vote.
We thank David Argente, Costas Arkolakis, David Atkin, Andy Bernard, Matilde Bombardini, Ariel Burstein, Lorenzo Caliendo, Thomas Chaney, Davin Chor, Arnaud Costinot, Ben Faber, Cecilia Fieler, Gordon Hanson, Doug Irwin, Pablo Fajgelbaum, Gene Grossman, Amit Khandelwal, Sam Kortum, Giovanni Maggi, Eduardo Morales, Evelyn Muñoz, Nathan Nunn, Steve Redding, Andres Rodriguez-Clare, Dani Rodrik, Esteban Rossi-Hansberg, Ken Scheve, Todd Schoellman, Pete Schott, Jose Vasquez, Eric Verhoogen, David Weinstein, and seminar participants at Yale University, Princeton University, Harvard University, GEP/CEPR Summer Trade Workshop, Federal Reserve Bank of Minneapolis, University of Southern California, Central Bank of Costa Rica, Universidad de Los Andes, U.S. Census Bureau, UC Berkeley Haas, and Columbia University for helpful comments and discussion. The views expressed herein are those of the authors and do not necessarily represent the views of the Central Bank of Costa Rica. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.