Openness and Prosperity: Rise and Fall of Globalization and Preferences for Trade

• In Event: Determinants of Trade Preferences

Abstract

Globalization has markedly shaped current socioeconomic beliefs, but does it foster a generation of global citizens advocating further integration or lead to the nostalgia of self-reliance? How can we synthesize diverse trade preferences across countries and generations within a unified
analytical framework? With an extensive focus on advanced industrialized countries, the conventional approach to examining responses to international trade has centered on deductive reasoning, wherein individuals derive preferences from evaluating the impact of trade on their self-interest and group well-being, informed by their current comparative advantage in the global market

This paper proposes a socialization approach, arguing that people can learn trade preferences from their early experiences of openness and growth. In a complex context such as policy evaluation, making predictions through rational analysis is usually challenging for the public because of their lack of attention to most economic issues. Instead, inducing policies' implications from their past performance is more accessible. Accelerated growth after economic liberalization provides direct evidence embodying the benefits of international trade. Moreover, people process the same information in selective ways. Previous positive interactions with free trade structure a perspective through which the mass public interprets future openness in an economically beneficial way.

Based on two cross-national datasets compiled from multiple Asian and international surveys, I first examine the impacts of early experiences on trade preferences using standard fixed-effect models. Moreover, leveraging the Asian Financial Crisis as a natural experiment, I employ a cohort difference-in-difference-in-difference (DDD) identification strategy to provide more causal evidence. These analyses consistently show that past exposure to greater openness led to significantly stronger later-life trade support when the economy was also expanding. However, if economic conditions deteriorated, the effects shrink and would even result in more opposition to free trade. Further examination suggests that personal experiences of openness and prosperity contribute to trade support by improving long-term material well-being and cultivating cosmopolitan values. The relationship between personal experiences and trade preferences is robust to several competing explanations such as age-cohort effects, democratization experiences, alternative measurements of the explanatory variables, and different sample choices.

By underscoring the crucial role of life experiences, this study first advances our understanding of preference formation in general and the views on globalization in particular. Beyond current debates on which personal characteristics people rely on to deduce their preferences, this project takes a step further by highlighting an inductive way---learning from personal experiences---to understand trade attitudes. Additionally, by shedding light on the connection between economic experiences and political preferences, this paper also joins a small but growing literature bridging the material and non-material explanations of globalization attitudes. Second, built on large diverse datasets, my study shifts the focus away from recent backlashes in developed countries. It connects, horizontally, the experiences between well-researched advanced industrial countries and developing countries as well as countries within the developing world. Vertically, it studies the most recent episode of globalization emphasizing inter-state competition and its rose-colored early phase when international trade seemed to be a path to reach a prosperous and integrated future.

Author

• Yujin Zhang, Columbia University