ALICE Z. XU

Trade liberalization and the welfare state: The geography of subnational political ties in Brazil

While there is evidence that trade liberalization induced the growth of the welfare state in advanced industrialized nations, its effects in developing democracies is much more ambiguous. In this paper, I first address the methodological challenges in the literature by causally estimating the effects of trade openness using a quasi-natural experiment in Brazil. The results confirm the “compensation hypothesis:” liberalization induces welfare compensation. However, I argue that especially in federal countries, subnational variation in political geography mediates the positive effect of trade on welfare. In microregions with the spatial concentration of either political support for the governor or of labor market risk, the positive effect of trade on welfare is magnified. Alternatively, the geographic dispersion of both dimensions almost completely negates the compensation effect.

I show that the concentration of the governor’s constituency reflects capacity for collective action and also the type of voter-politician ties that exist. While geographically dispersed constituencies tend to be united by racial, religious, or ideological appeals (i.e., descriptive representation), concentrated ones reflect stronger dyadic voter-governor ties and, thus, politicians of such constituencies are more responsive to economic need. The results spotlight the political discretion of subnational politicians and patterns in subnational political ties as, collectively, a prime mechanism that explains the contradictory effects of trade on compensation.