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Fair Trade Agreements

with R.W. Staiger

NBER Working Paper No. 32853, 2024

The legitimacy of the world trading system is under growing attack, as challenges to its conformity with norms of fairness and social justice are increasingly voiced by citizens and their governments around the world. Taking a novel "bottom up" approach to concerns for fairness, we show how these concerns can be formalized in a general and tractable way, and we describe their implications for the purpose and design of a trade agreement. Our findings suggest that as currently designed, the GATT/WTO is well-equipped to allow its member governments to address many, but not all, of the possible trade-related fairness concerns of their citizens. More generally, our findings point to a detailed understanding of real-world perceptions of fairness in trade policy as the key input into the appropriate design of fair trade agreements.

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Externalities and the Erosion of Trust

with G. Daniele, A. Martinangeli, W. Sas, and L. Windsteiger

CESifo Working Paper No. 10474, 2023​

We present a theory linking political and social trust to explain trust erosion in modern societies. Individuals disagree on the seriousness of an externality problem, which leads to diverging policy opinions on how to solve it. This heterogeneity has two important effects on trust. First, disappointment with the policy rule enacted by the government breeds institutional distrust. Individuals that are more worried blame the government because the rule is too lenient. The less worried blame it even more because it is too intrusive. Second, as the rule also shapes individuals’ notion of civic behavior, it drives a wedge between what an individual expects from others and their actual behavior. This fuels social distrust. The more individuals are worried, the more they distrust others that are not complying with the rules. Our experimental survey conducted in four European countries shows how these trust dynamics came to the surface during the Covid-19 pandemic. Once led to think intensely about the virus, lower institutional trust was reported predominantly by respondents that were less worried about the virus, whereas social trust declined (more) for worried individuals. We lastly find that support for the welfare state erodes alongside sliding trust levels.

Wind of Change?
Experimental Survey Evidence on the COVID-19 Shock and Socio-Political Attitudes in Europe

with Gianmarco Daniele, Andrea F.M. Martinangeli, Willem Sas, Lisa Windsteiger

The Max Planck Institute for Tax Law and Public Finance Working Paper No. 2020-10​

This paper investigates whether the COVID-19 crisis has affected the way we vote and think about politics, as well as our broader attitudes and underlying value systems. We fielded large online survey experiments in Italy, Spain, Germany and the Netherlands, well into the first wave of the epidemic (May-June), and included outcome questions on trust, voting intentions, policies & taxation, and identity & values. With a randomised survey ow we vary whether respondents are given COVID-19 priming questions first, before answering the outcome questions. With this treatment design we can also disentangle the health and economic effects of the crisis, as well as a potential \rally around the flag" component. We find that the crisis has brought about severe drops in interpersonal and institutional trust, as well as lower support for the EU and social welfare spending financed by taxes. This is largely due to economic anxiety rather than health concerns. A rallying effect around (scientific) expertise combined with populist policies losing ground forms the other side of this coin, and hints at a rising demand for competent leadership.

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Collective Emotions and Protest Vote

with A. Altomonte and G. Gennaro

CESifo Working Paper No. 7463, 2019

We leverage on important findings in social psychology to build a behavioral theory of protest vote. An individual develops a feeling of resentment if she loses income over time while richer people do not, or if she does not gain as others do, i.e. when her relative deprivation increases. In line with the Intergroup Emotions Theory, this feeling is amplified if the individual identifies with a community experiencing the same feeling. Such a negative collective emotion, which we define as aggrievement, fuels the desire to take revenge against traditional parties and the richer elite, a common trait of populist rhetoric. The theory predicts higher support for the protest party when individuals identify more strongly with their local community and when a higher share of community members are aggrieved. We test this theory using longitudinal data on British households and exploiting the emergence of the UK Independence Party (UKIP) in Great Britain in the 2010 and 2015 national elections. Empirical findings robustly support theoretical predictions. The psychological mechanism postulated by our theory survives the controls for alternative non-behavioral mechanisms (e.g. information sharing or political activism in local communities).

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