Subsidies could boost manufacturing – but only under the right conditions
Subsidies can be a vital boost for companies and industries. But they also carry a risk of creating distortions in the economy. In this post, I identify three principles that should inform and underpin subsidies to minimise these risks. These suggestions draw on research from my book on government subsidies, Spending to Win
More government assistance does not reduce voters’ opposition to globalisation
Both the EU and the US have dedicated programmes for providing compensation to workers made unemployed by globalization. Does this funding have any impact on voting behaviour? In a new study, I finds that additional assistance for globalisation-displaced workers provided by the European Globalisation Adjustment Fund (EGF) does not significantly reduce voters’ support for one of Europe’s most prominent anti-globalisation political parties.
Explaining Conflict over International Environmental Cooperation
Protecting the environment is one of the most pressing issues countries face today. Yet, nations disagree over how to achieve this goal. Such international disagreement arises from domestic politics, as I demonstrate in a recent study. Because disagreements over international environmental cooperation are rooted in domestic politics, greater global cooperation may be possible only if domestic politics change. The beginning of international environmental cooperation starts at home.
The Inflation Reduction Act and a looming international subsidy war
Last year the Congress passed the Inflation Reduction Act (IRA) which provides billions in subsidies and tax credits to US companies. Drawing on my book, Spending to Win, I write that the IRA shows how many governments have turned to subsides or increased spending on them to not only bolster their own industries, but often more importantly, to win voters’ support.
COVID may accelerate offshoring — and, if so, voters will punish governing parties
As they rushed to adapt to the pandemic, many firms adopted remote working practices. Some of these practices may lead firms to offshore jobs. If the pandemic stimulates a new wave of offshoring, economic and political challenges will follow. In a recently published study, I find that voters punish governing parties when offshoring occurs in their local area.
Biden’s plan to discourage offshoring may help him politically
One of the most important objectives of President Biden's “Made in America” tax plan is to reduce the offshoring of American jobs. To achieve this goal, the administration seeks to eliminate tax-based incentives to move production overseas. Biden’s efforts to stop offshoring are politically savvy. Voters dislike offshoring. In a recently published study, I find evidence that voters dislike offshoring so much that they punish politicians in office (also known as incumbents) by voting against them when offshoring occurs in their local area.
Why did Trump agree to a temporary hold on further China tariffs?
In The Washington Post's Monkey Cage, I argue that Trump's trade war with China is far from over, despite his agreement to a temporary hold on further tariffs. The rules governing national U.S. elections make politicians especially responsive to geographically concentrated groups — such as American steel manufacturers and farmers. Trump, with his sights set firmly on the 2020 election, hopes to appeal to both farmers and steelmakers by implementing tariffs on steel and funding subsidies for farmers.
The Irony of Trump's $12-billion farm subsidies
While researching my new book on subsidies, Spending to Win, I came across many different types of the financial aid. Some helped producers hurt by foreign trade. Others assisted economically disadvantaged regions. None were intended to offset damages inflicted by domestic tariffs, like Trump’s proposed US $12-billion farm subsidies. Trump’s aid program is an attempt to compensate farmers for income lost from foreign tariffs imposed on US goods in response to Trump’s own tariffs. But if Trump’s tariffs on steel, solar panels, and other goods are hurting farmers, the obvious solution is not an expensive $12 billion subsidy program. Instead, removing the offending tariffs and deescalating the mounting trade war would be a far better solution.
The Politics Behind Trump's Steel Tariffs
In March 2018, Trump fulfilled his campaign promise to steel workers by imposing tariffs of 25% on steel imports into the United States. Such promises are a useful vote-winning tool in plurality electoral systems when the beneficiaries of such protection are geographically concentrated, like the American steel industry If, however, the US steel industry had been more evenly dispersed across the country, promising tariffs for the industry would have “over bought” support in some states where Trump did not need any additional votes to win. In this way, providing economic benefits to geographically diffuse groups is an inefficient election strategy in plurality systems.
Trade Adjustment Assistance: Stumbling block or stepping stone?
The United States' Trade Adjustment Assistance (TAA) program helps citizens made worse off by increased international trade. Yet, I find that legislators whose constituents gain from trade are the ones most likely to support TAA funding. Even Republicans, who often oppose spending increases, are willing to support TAA funding when a large portion of their constituents stand to gain from freer trade. This pattern suggests that TAA helps to widen the coalition of support for free trade. However, in 2015, TAA proved to be more of a stumbling block than a stepping stone to liberalization.
Greece’s creditors are paying the price for not relaxing their conditions prior to the 2015 election
Greece and the International Monetary Fund (IMF) deadlocked over the release of bailout funds to assist the country. The impasse could have been avoided if the IMF pursued the strategy they used in previous loan programmes. I find evidence that the IMF typically relaxed loan programme requirements in the lead up to democratic elections in borrowing countries. By failing to do so in the Greek case, the foundations were set for Syriza to come to power on an anti-austerity platform, making any compromises far more difficult.
Britons favour bailouts for countries with strong ties to the UK
Who supports international bailouts, and why? Using survey data from the UK, I find that public support for international bailouts depends on the identity of the recipient country. British citizens are more supportive of loans to countries with closer economic links to the UK.
Will 2015 bring a TTIP agreement? Maybe, with the help of TAA
Opposition to free trade agreements can be reduced by government-funded compensation programs. In the United States, Trade Adjustment Assistance (TAA) provides financial aid to workers who lose their jobs or experience a reduction in their income due to trade. Opposition to the TTIP agreement may soften if legislators agree to fund programs, like TAA, that compensate individuals for economic losses stemming from international trade agreements.
Will Britain behave better in international forums with AV?
Some democratic countries are better international citizens than others. In new research, I show that the more proportional a country’s voting system is, the more likely it is to honor its international commitments on trade issues.