1. Ismael Sanz Ferrán Martínez i Coma Federico Steinberg
Does social spending increase support for free trade in advanced countries?
Ismael Sanz Ferrán Martínez i Coma Federico Steinberg

2. Outline Motivation Literature review Econometric analysis and results
Conclusions and further research

3. Motivation
Backlash against globalizatio in rich countries  is globalization sustainable?
Combine two related bodies of literature:
Determinants of individual trade policy preferences
Political economy underpinnings of economic openness
Explore if high social spending explains support for free trade, controllling for a number of relevant variables.

4. Literature review Preferences towards free trade:
Theory: H-O versus Ricardo-Viner (role of interest/skills over ideas and institutions)
Empirical tests: Mixed results. More support for H-O (Sheve and Slaughter (2001),Mayda and Rodrik 2005
Compensation Hypothesis /embedded liberalism
Theory: Rodrik (1998), Ruggie (1982)
Empirical tests: Hays, Ehrlich and Peinhardt (2005), Scheve and Slaughter (2006); Mayda, O'Rourke and Sinnott (2007)

5. Country
Support for free trade
Social Security expenditure (% GDP):
average for
Pension expenditure (% GDP):
average for
Unemployment expenditure (% GDP):
Australia
2.25
17.66
5.03
0.98
Austria
2.44
25.64
10.63
0.75
Canada
2.64
17.14
4.77
Czech Republic
2.66
20.72
6.77
0.26
Denmark
3.30
26.65
8.29
2.99
Finland
3.00
21.77
7.78
2.05
France
2.61
27.92
10.62
1.63
Germany
2.83
27.06
11.56
1.23
Hungary
2.22
21.47
7.89
0.42
Ireland
2.56
14.87
2.65
Japan
2.86
17.04
7.03
0.50
South Korea
2.60
5.39
1.31
0.12
New Zealand
2.47
18.49
4.86
1.26
Norway
23.77
6.65
0.43
Poland
2.23
22.38
8.30
0.89
Portugal
2.46
21.69
7.70
0.91
Slovakia
2.15
17.78
6.70
0.69
Spain
2.49
20.27
8.38
1.33
Sweden
3.12
29.94
9.22
1.14
Switzerland
3.05
19.18
11.61
United Kingdom
2.40
19.89
8.17
0.29
United States
2.35
15.49
5.23
0.27
Simple mean
2.58
20.56
7.33
0.92

6. Correlation between support for free trade and Social Security expenditure, OECD, 2000-03

7. Econometric analysis Data
International Social Survey Programme questionnaire on national identity, which surveys from 33 countries

8. Econometric results

9. Econometric results

10. Correlation between support for free trade by country (factoring in individual characteristics and social expenditure), OECD,

11. Conclusion The compensation hypothesis argues that:
Popular support for globalization hinges on maintaining the Welfare State because
We find support for this hypothesis in OECD countries (desegregating the WS in Social spending, pension spending, unemployment)
We also find new results on the determinants of trade policy preferences in line with H-O