| Abstract: |
We show that the Brazilian trade liberalization in the early 1990s led to a
permanent relative decline in the vote share of left-wing presidential
candidates in the regions more affected by the tariff cuts. This happened even
though the shock, implemented by a right-wing party, induced a contraction in
manufacturing and formal employment in the more affected regions, and despite
the left's identification with protectionist policies. To rationalize this
response, we consider a new institutional channel for the political effects of
trade shocks: the weakening of labor unions. We provide support for this
mechanism in two steps. First, we show that union presence—proxied by the
number of workers directly employed by unions, by union density, and by the
number of union establishments—declined in regions that became more exposed to
foreign competition. Second, we show that the negative effect of tariff
reductions on the votes for the left was driven exclusively by political
parties with historical links to unions. Furthermore, the impact of the trade
liberalization on the vote share of these parties was significant only in
regions that had unions operating before the reform. These findings are
consistent with the hypothesis that tariff cuts reduced the vote share of the
left partly through the weakening of labor unions. This institutional channel
is fundamentally different from the individual-level responses, motivated by
economic or identity concerns, that have been considered in the literature. |