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PUBLIC FINANCE AND INDIVIDUAL PREFERENCES



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ECONOMICS POLITICS Volume 19 0954 1985 March 2007 No 1 PUBLIC FINANCE AND INDIVIDUAL PREFERENCES OVER GLOBALIZATION STRATEGIES GORDON H HANSON KENNETH SCHEVE AND MATTHEW J SLAUGHTER Do preferences toward globalization strategies vary across public nance regimes In this paper we use data on individual preferences toward immigration and trade policy to examine how pre tax and posttax cleavages di er across globalization strategies and state scal jurisdictions High exposure to immigrant scal pressures reduces support for freer immigration among U S natives especially the more skilled The magnitude of this post tax scal cleavage is comparable to the pretax labor market e ects of skill itself There is no public nance variation in opinion over trade policy consistent with U S trade policy having negligible scal policy impacts Public nance thus appears to shape opinions toward globalization strategies 1 INTRODUCTION INTERNATIONAL ECONOMIC policies that regulate the ow of goods capital and labor across borders vary substantially not only across countries and over time but also within these di erent dimensions of integration with the world economy One of the major puzzles in political economy is why so many countries appear to adopt relatively liberal trade policies but relatively illiberal immigration regulations Trade and immigration liberalization both have the potential to improve a country s economic welfare through e ciency gains Because international ows of goods and labor both work to integrate national labor markets with the global economy these policies often have similar e ects on worker outcomes in the labor market leading many scholars to view the distributional consequences of liberalization to be quite similar as well Absent a simple e ciency or distributional explanation most existing scholarship turns to important non economic di erences between trade and immigration policy Most obviously negative voter attitudes toward foreign cultures and minority groups



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