Trade-Induced Unemployment: How Much Do We Care?

It is a common perception that a government, especially in the face of elections, is particularly sensitive to the presence of trade-induced unemployment. In this paper, I ask: how much weight does the incumbent politician actually attach to unemployment resulting from trade? To answer, I build a model that captures government's sympathy to trade-affected workers and allows me to decompose the channels through which trade-induced unemployment affects the level of sectoral protection chosen by a politically-driven incumbent official. I provide empirical evidence that the US government is very sensitive to the presence and the magnitude of trade-induced unemployment. Specifically, I estimate the weight that the office holder attaches to the welfare of trade-affected workers to be positive, significant, and four times larger than the weight on the welfare of those who are not affected by trade.