Skip to main content Accessibility help

Government Spending and Public Support for Trade in the OECD: An Empirical Test of the Embedded Liberalism Thesis

  • Jude C. Hays (a1), Sean D. Ehrlich (a2) and Clint Peinhardt (a3)


According to the embedded liberalism thesis, governments committed to free trade provide insurance and other transfers to compensate those who lose economically from expanded trade. The goal of this spending is to maintain public support for trade liberalization. We provide a micro-level test of the critical assumption behind the embedded liberalism thesis that government programs designed to protect individuals harmed by imports reduce opposition to free trade. Our micro results have important implications for the macro relationship between trade and government spending, which we also test. We find empirical support for the embedded liberalism thesis in both our micro- and macro-level analyses.Earlier versions of this article were presented at the Midwest Political Science Association's 2002 Meeting and at the University of Illinois during summer 2003. We thank the respective panel and seminar participants for their feedback. In addition, we want to acknowledge valuable comments from William Bernhard, Rebecca Blank, Kerwin Charles, Alan Deardorff, John DiNardo, John Freeman, Brian Gaines, Jim Granato, Nathan Jensen, William Keech, Layna Mosley, Robert Pahre, Ken Scheve, Marina Whitman, two anonymous reviewers, and Lisa Martin. They, of course, are not responsible for any errors.



Hide All


Adserà, Alicia, and Carles Boix. 2002. Trade, Democracy, and the Size of the Public Sector: The Political Underpinnings of Openness. International Organization 56 (2):22962.
Aldrich, John H., Claire Kramer, Peter Lange, Renan Levine, Jennifer Merolla, Laura Stephenson, and Elizabeth Zechmeister. 2002. In Pursuit of the Missing Link: Do Voters Make the Connection Between Macroeconomic Change and Welfare State Growth? Paper presented at the 98th Annual Meeting of the American Political Science Association, August–September, Boston.
Alt, James, and Michael Gilligan. 1994. The Political Economy of Trading States: Factor Specificity, Collective Action Problems and Domestic Political Institutions. Journal of Political Philosophy 2 (2):16592.
Blyth, Mark. 2002. Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century. Cambridge: Cambridge University Press.
Burgoon, Brian. 2001. Globalization and Welfare Compensation: Disentangling the Ties that Bind. International Organization 55 (3):50951.
Cameron, David. 1978. The Expansion of the Public Economy: A Comparative Analysis. American Political Science Review 72 (4):124361.
Franzese, Robert J. 2002. Macroeconomic Policies of Developed Democracies. Cambridge: Cambridge University Press.
Garrett, Geoffrey, and Deborah Mitchell. 2001. Globalization, Government Spending and Taxation in the OECD. European Journal of Political Research 39 (2):14578.
Hall, Peter, and David Soskice, eds. 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. New York: Oxford University Press.
Hiscox, Michael. 2002. International Trade and Political Conflict: Commerce, Coalitions, and Mobility. Princeton, N.J.: Princeton University Press.
Hiscox, Michael, and Brian Burgoon. 2003. Trade Openness and Political Compensation: Explaining Labor Demands for Adjustment Assistance. Unpublished manuscript. Cambridge, Mass.: Harvard University.
Hsiao, Cheng. 2003. Analysis of Panel Data. 2d ed. Cambridge: Cambridge University Press.
Iversen, Torben, and Thomas R. Cusack. 2000. The Causes of Welfare State Expansion: Deindustrialization or Globalization? World Politics 52 (3):31349.
Judson, Ruth A., and Ann L. Owen. 1999. Estimating Dynamic Panel Data Models: A Guide for Macroeconomists. Economic Letters 65 (7):915.
Katzenstein, Peter. 1985. Small States in World Markets: Industrial Policy in Europe. Ithaca, N.Y.: Cornell University Press.
King, Gary, Michael Tomz, and Jason Wittenberg. 2000. Making the Most of Statistical Analyses: Improving Interpretation and Presentation. American Journal of Political Science 44 (2):34761.
Mares, Isabela. 2004. Economic Insecurity and Social Policy Expansion: Evidence from Interwar Europe. International Organization 58 (4).
Mayda, Anna M., and Dani Rodrik. 2002. Why Are Some People (and Countries) More Protectionist than Others? Unpublished manuscript. Cambridge, Mass: Harvard University.
McKelvey, Richard, and William Zavoina. 1975. A Statistical-Model for Analysis of Ordinal Level Dependent Variables. Journal of Mathematical Sociology 4 (1):10320.
Moulton, Brent R. 1990. An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Units. Review of Economics and Statistics 72 (2):33438.
Organization for Economic Cooperation and Development (OECD). 1998. Benefit Systems and Work Incentives. Paris: OECD.
Organization for Economic Cooperation and Development (OECD). 2001. Social Spending Database. Paris: OECD.
Organization for Economic Cooperation and Development (OECD). 2003a. Labor Force Database. Paris: OECD.
Organization for Economic Cooperation and Development (OECD). 2003b. Economic Outlook Database. Paris: OECD.
O'Rourke, Kevin H., and Richard Sinnott. 2002. The Determinants of Individual Trade Policy Preferences: International Survey Evidence. In Brookings Trade Forum: 2001, edited by Susan M. Collins and Dani Rodrik, 157206. Washington, D.C.: Brookings Institution.
Pierson, Paul. 1994. Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment. Cambridge: Cambridge University Press.
Pierson, Paul. 2001. The Dynamics of Welfare State Expansion: Trade Openness, De-industrialization, and Partisan Politics. In The New Politics of the Welfare State, edited by Paul Pierson, 80104. New York: Oxford University Press.
Rodrik, Dani. 1997. Has Globalization Gone Too Far? Washington, D.C.: Institute for International Economics.
Rodrik, Dani. 1998. Why Do More Open Economies Have Bigger Governments? Journal of Political Economy 106 (5):9971032.
Ruggie, John G. 1982. International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order. International Organization 36 (2):195231.
Ruggie, John G. 1994. Trade, Protectionism, and the Future of Welfare Capitalism. Journal of International Affairs 48 (1):111.
Ruggie, John G. 1997. Globalization and the Embedded Liberalism Compromise: The End of an Era? Working Paper 97/1. Cologne, Germany: Max Planck Institut für Gesellschaftsforschung.
Ruggie, John G. 2003. Taking Embedded Liberalism Global: the Corporate Connection. In Taming Globalization: Frontiers of Governance, edited by David Held and Mathias Koenig-Archibugi, 93129. Oxford: Polity Press.
Scheve, Kenneth, and Matthew Slaughter. 2001. Globalization and the Perceptions of American Workers. Washington, D.C.: Institute for International Economics.
Steenbergen, Marco R., and Bradford S. Jones. 2002. Modeling Multilevel Data Structures. American Journal of Political Science 46 (1):21837.
Swank, Duane. 2002a. Global Capital, Political Institutions, and Policy Change in Developed Welfare States. Cambridge, UK: Cambridge University Press.
Swank, Duane. 2002b. 21-Nation Pooled Time-Series Data Set, 1950–1999: Political Strength of Political Parties by Ideological Group in Capitalist Democracies. Milwaukee, Wis.: Marquette University. Available at 〈〉. Accessed January 18, 2005.
Tomz, Michael, Jason Wittenberg, and Gary King. 1999. Clarify: Software for Interpreting and Presenting Statistical Results. Version 1.2.1. Cambridge, Mass: Harvard University. Updated version 2.1 (produced 5 January 2003). Available at 〈〉. Accessed January 18, 2005.


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed