Do People Think like Stolper-Samuelson?  Part III 

 In two previes entries  here  and  here  we wrote about a recent paper that re-examines the available evidence for the prominent claim that public attitudes toward trade follow the Stolper-Samuelson theorem (SST). We presented evidence that is largely at odds with this hypothesis. In this posting, we take issue with the last specific finding in this literature that has been interpreted as strong support for the SST: The claim that the skill effect of trade preferences is proportional to a country’s factor endowment. What the heck does this mean?  

 Recall that the according to the SST, skilled individuals will gain in terms of real wages (and thus should be likely to favor trade openness) in countries that are abundantly endowed with skilled labor, but the size of those gains should be proportional to the degree of skill abundance in each country.  Of course, in countries that are actually poorly endowed with skilled labor relative to potential trading partners, those gains should become losses. 


 The seminal paper on this topic, Rodrik and Mayda ( 2004 ), shows evidence supporting this idea that the skill effect (proxied by education) is proportional to a country’s factor endowment: they find the largest positive effects in the richest (i.e. most skill adundant) and smaller positive effects in the somewhat poorer (skill scare) countries in their sample. For the only really poor country in their survey sample, the Philippines, they even find a (significant) negative effect (i.e. more educated are less likely to support trade liberalization). This finding constitutes R&M's  smoking gun evidence that preferences do indeed follow the SST - the finding very often cited in the literature.  

 The central problem with the R&M findings, which are mainly based on data from the International Social Survey Programme (ISSP), is the lack of skill scare countries in their sample. Their data thus does not allow for a comprehensive test of the claim that the skill effect of trade preferences is proportional to a country’s factor endowment, simply because most countries in their sample are skill abundant, relatively rich economies. In the  supplement  to a recent  paper  we specifically reexamine the R&M claim, using  data from the Global Attitudes Project survey administered by Pew in 2002. The PEW data has not been examined by scholars interested in attitudes toward trade, although it has some key advantages compared to the other datasets that have been used (ISSP, etc.). Most importantly, it covers a much broader range of economies that are very heterogeneous in terms of their levels of skill endowments. The PEW data does not only covers the Philippines, but additionally 43 countries, many of which are skill scare.  

 This  figure  summarizes our results from the PEW data. It plots the estimated marginal effect of an additional year of schooling on the probability of favouring free trade (evaluated at the sample means, using country specifc ordered probit models) against skill endowment as measured by the log of GDP per capital in 2002 (PPP).  The solid diamonds decode the point estimates and the dashed lines shows the .90 confidence envelopes.  

 Two main findings emerge here: First, there is no clear relationship between the marginal effect of education on support for trade among respondents and their countries’ skill endowments. The pattern more resembles that of a drawing by expressionist painter Jackson Pollack than that of a clear upwards sloping line (what one would predict based upon a simple application of Stolper-Samuelson). Second, in all countries increased schooling has either a positive or zero effect on the probability of supporting free trade. This includes the Philippines which is the only case of a country abundant in low-skills for which Mayda Rodrik and found a negative relationship. Moreover, even most of the point estimates are positive, except for Canada, Ivory Coast, Mali, and Nigeria; not quite a cluster of countries with common skill endowments!  

 Overall these results strongly suggest that the impact of education levels on support for trade among individuals is not driven by differences in skill endowments across countries (and individual concerns about wage levels) as suggested by a simple application of the Stolper-Samuelson theorem.