Does social spending increase support for free trade in advanced democracies?

Zusammenfassung

The compensation hypothesis states that governments adopt social programs to compensate individuals for accepting high trade exposure. Previous empirical studies have tested this hypothesis by analysing the effects of international trade on social welfare spending, finding ambiguous conclusions. We test this hypothesis from a different perspective. Using the International Social Survey Programme (ISSP) questionnaire, we analyse the association between social welfare spending and the countries support for free trade in 22 OECD countries. We find that individuals tend to be more in favour of free trade in countries that spend more on social welfare benefits. This association becomes stronger once we have controlled for individual economic and noneconomic factors affecting attitudes towards free trade. Furthermore, the association applies to the components of social welfare spending most importantly related to economic insecurity: pensions plus unemployment benefits.