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Low-wage import competition and populist backlash: The case of Italy

Guglielmo Barone () and Helena Kreuter ()
Additional contact information
Helena Kreuter: FiFo Institute for Public Economics, University of Cologne

No 241, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: The surge of populism in many advanced countries calls for the analysis of its causes. In this paper, we empirically study the role of trade globalization in shifting the electoral base toward populism. We proxy trade shock with swiftly rising import competition from China and compare the voting pattern at the parliamentary national elections from 1992 to 2013 in about 8,000 Italian municipalities differently exposed to the trade shock. We instrument import competition with Chinese export flows to other high-income countries and estimate the model in first differences. Our results show that trade globalization increases support for populist parties; they are robust to a large number of sensitivity checks. Moreover, we show that voters’ protest reaction also takes the form of an increase in invalid ballot papers and a drop in turnout. To rationalize these findings, we further offer evidence that import competition worsens labor market conditions – higher unemployment and lower income – and is associated with a rise in inequality, as predicted by trade theory.

Keywords: trade globalization; populism; inequality (search for similar items in EconPapers)
JEL-codes: D72 F60 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019-10
New Economics Papers: this item is included in nep-int, nep-lab and nep-pol
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