Company influences personal position? Research on trade perspectives based on company framework
Author: Haillie Na-Kyung Leea, Associate Professor, Department of Political Science and International Relations, Seoul University; Yu-Ming Liou, Researcher at Wikimedia Foundation.
Source: Haillie Na-Kyung Leea and Yu-Ming Liou, “Where You Work Is Where You Stand: A Firm-Based Framework for Understanding Trade Opinion,” International Organization, Vol.76, No.3, 2022, pp.713-740.
Introduction
What determines the degree of public support for trade liberalization? In the past, international political economy generally focused on the impact of openness on employment through personal skill level, department or occupation. The latest trade economics research shows that the characteristics of individuals' employment companies may also affect their attitude towards trade policy. By using underdeveloped survey data and combining trade perspectives with the 2008 Japan Comprehensive Social Survey measures of employer productivity, this paper demonstrates that even if skill levels, departmental and occupational characteristics are taken into account, employees from more productive and more globalized companies tend to support trade liberalization than relatively low-productive and domestically oriented companies. Furthermore, these characteristics described in the literature are found to be restricted by employment of globalized enterprises. Finally, this article finds that the impact of employment of globalized companies is restricted by the relative position of employees within the company, and people like long-term employees and managers who are more likely to benefit from the development of the company have the preferences that most support trade liberalization. These findings suggest that the impact of economic interests on individual policy preferences is more subtle than previous perceptions.
Theory
Research on personal trade preferences in international political and economics mainly focuses on using the labour market effect of economic openness to explain changes in preferences, predicting that individuals will form trade policy preferences based on the actual or expected impact of openness on their wages and/or job security. Recent trade economics research shows that the increasingly complex global economic situation has led to a new branch of trade preferences based on corporate productivity heterogeneity. This "new and new trade theory" believes that considering the high fixed costs required for cross-border economic activities, only enterprises with the strongest production capacity can participate in exports, imports or foreign direct investment in and benefit from it. It turns out that corporate productivity exists before participation in exports or foreign investment, rather than generated by them. Therefore, economic liberalization allows enterprises with strong production capacity to increase their market share, reducing input costs, but put weaker productive and domestically oriented companies facing import competition, resulting in lower profit margins and possible market exits. Consistent with economic research, recent political science research has also shown that firms’ preferences and political activities for economic liberalization vary by productivity.
Based on this, this paper expands the logic proposed by previous trade perspective research (Hiscox, 2001), that barriers to labor mobility can produce politically consequential differences in trade preferences, believing that companies constitute an important additional dimension that separates relative winners and losers from trade.
Why does employees' preference for trade openness converge with employers' preferences? First, employees of companies with higher productivity (lower) can achieve wage growth (cut) and job security (decreased) during the liberalization process. Even if the average impact of openness on employment is negative, employees of higher productivity companies are relatively less affected. Furthermore, Labor Economics research shows that workers who are replaced by large-scale layoffs (e.g., due to import competition) after obtaining new jobs, suffer short-term and long-term income losses, whether in the same industry or not. Considering the ongoing negative impact of layoffs on benefits, this article expects employees to be particularly interested in keeping their existing jobs.
In addition, the author discusses the possibility of selective bias in this conclusion.Any obvious effect of employer productivity on employees’ preference for trade openness may be just the product of an established process based on productivity matching between employees and employers: Employees with higher productivity (lower) tend to work for employers with higher productivity (lower) productivity. But the author also pointed out that a large number of studies have shown that by describing two types of transaction costs, , that lead to labor friction, it shows that corporate productivity plays an important role in the impact of employee preferences. First, employees develop the company's unique human capital. While general forms of human capital can easily be transferred between businesses, business-specific human capital (most of which are proprietary and rely on patents or trademarks) is less productive to other employers. Secondly, companies will also suffer huge cost losses when experiencing labor mobility. The consequence of these frictions is an incompletely competitive labor market: Individuals with similar productivity are employed by companies with different productivity, thus creating wage differences among individuals with the same inherent productivity. Therefore, due to company rental/profit sharing, employees of high-productivity companies may receive wages higher than their inherent marginal productivity .
This article focuses on explaining how productivity at the enterprise level affects individual trade preferences through rent-sharing mechanisms, but it is worth noting that the latest research on American politics and a large number of organizational psychology literature also show that companies can influence employee preferences and political behavior through other channels, which will be a possible research direction in the future.
empirical test and evidence
1. Core hypothesis
This paper proposes three main hypotheses based on the theoretical framework:
H1: Compared with weaker companies, employees of internationally competitive companies prefer open trade.
H2: The relationship between an individual's economic attributes (such as skill level, industry or occupation) and industry opinions will be adjusted by employer competitiveness.
H3: The impact of employer competitiveness depends on the degree of employee recognition of employer interests. Those who are more likely to benefit from the increased profitability of employers have also systematically increased their support for trade openness.
2. Data selection
Assessing the impact of heterogeneous enterprise productivity on employee trade preferences requires data that combine personal preferences and employer characteristics. This article selects a basically unused module from the 2008 Japan General Social Survey (JGSS) to measure attitudes toward globalization. The survey included data on the characteristics of ownership, scale and economic activity of the respondent’s employer, as well as measures of job market insecurity and broader social and political attitudes. This sample is nationally representative, including the employment sector of the respondents: the proportion of respondents working in manufacturing and services was 28% and 67%, respectively, which is basically in line with the 20% and 70% announced by the World Bank in the same year.
3. Empirical results
This paper uses JGSS data to evaluate the hypothesis through ordinary least squares (OLS) regression. Consistent with expectations, this article found that employees of globally competitive companies prefer trade openness and are more likely to support trade openness within specific industries, skill levels or task routines and offshore outsourcing levels. In addition, the relationship between corporate characteristics and employee trade preferences is regulated by relative status. Employees of globalized businesses (e.g., managers) benefit more directly from corporate success, and they particularly support free trade.
Figure 1 Hypothesis 1: Comparison of substantial effects
To facilitate the explanation of regression results, Figure 1 compares the substantial effects. The impact of globalized employers on protection (variance in the protection forecast values of globalized employers and domestic employers, as shown in Figure 1a) is roughly comparable to that of university graduates (Figure 1b) and vulnerable industries (Figure 1c).
Figure 2 Hypothesis 2: Effects of economic attributes constrained by employer type
Figure 2a shows that the impact of sectors depends on globalized enterprise employment. Although domestic company employees in relatively disadvantaged industries are more likely to support trade restrictions than employees in relatively disadvantaged industries, employees of globalized companies are less likely to support protectionism in the comparative and relative disadvantaged industries category.Furthermore, this paper does not observe any significant differences in supporting protectionism among employees of globalized companies working in relatively strengths and weakness industries, suggesting that the impact of the employment sector on trade opinions may be concentrated on employees of domestic companies.
Figure 2b shows that the effect of skill level on trade opinions depends on the type of employer: College graduates employed in globalized companies are less likely to support protection than college graduates employed in domestic companies, and non-college students employed in globalized companies are less likely to support protection than non-graduates employed in domestic companies.
Figure 2c and 2d show the substantial effect of the interaction between task routine (i.e. creativity and spontaneity required to perform tasks) and offshore outsourcing capabilities on the observed level of protection. For all offshoring capability level task routine variables, global enterprise employees support free trade more than domestic enterprise employees. With the increase in offshoring capabilities, domestic companies’ employees hold an increasing protectionist view. However, the same growth in offshore outsourcing capacity has no (even negative) impact on the support of globalized company employees for protection. This is consistent with H2: The association between an individual's economic attributes (e.g., skill level, industry or occupation) and industry opinions will be adjusted by employer competitiveness. However, contrary to expectations, the increase in routineity (average offshore outsourcing) has no effect on the protectionist view of employees in domestic and globalized companies, although the latter employees do not support protectionism at every level of routineity.
Figure 3 Hypothesis 3: Changes within the company
The results in Figure 3 show that the employment effect of globalized enterprises depends on the relative position of employees in the enterprise. In globalized companies, the relative “winners”, i.e. those who are more likely to benefit from the employer’s success (e.g., permanent employees and managers), obviously do not support import restrictions; while the relative “losers”, i.e. those who are less likely to share their employer’s success, express similar preferences to those of domestic company employees. The strong support of managers for trade is unlikely to be a product of the relative liquidity of the labor market for two reasons: From a theoretical perspective, highly skilled or higher status employees are more likely to develop company-specific skills, thereby reducing liquidity between companies. From an empirical perspective, in JGSS data, college graduates and non-college graduates have almost the same years of working for any particular age group, while managers have significantly longer working years than non-governmental staff.
Conclusion
By analyzing the data from JGSS in 2008, this article shows that even if takes into account skill levels, departmental and occupational characteristics, employer productivity plays an important role in shaping individual attitudes towards globalization. Given the importance of employment to most people's lives, the financial interests of employees are often consistent with those of employers. At the same time, the high barriers to entering the global market mean that only more productive and competitive companies can participate in global economic activities. Therefore, employees of more productive companies (more likely to compete globally) tend to be more free trade than employees of domestic companies. This may be because employees of globalized companies want to benefit from the success of their employers, whether in the form of continuing employment or in the form of increasing wages through rent sharing. These findings are of great significance to our understanding of the possible sources of domestic conflict on the issue of globalization, as companies with stronger production capacity engage in more transnational economic activities, leading to increasingly divergences of interests with domestic companies. Furthermore, this article extends this logic to identify relative winners and losers within the enterprise. Through various measures, this article finds that higher status among globalized companies are generally more opposed to protectionism than those with lower status employees.
In addition, company-centered policy preference understanding framework has important implications for policy outcomes in other areas of economic problem . Employer characteristics may increasingly be predicting social disparities on some issues beyond trade, including FDI, fiscal and monetary policy, labor and health regulations, environmental policies, and immigration and border controls.Future research on this issue will help us better understand how corporate-level characteristics affect political behavior at the micro level and conditions where they may be more influential than other economic, political and psychological factors. At the same time, the results of this paper still require more empirical study of to test its external validity and whether changes in the economic and political environment since 2008 have changed the impact of employer productivity on individual trade opinions. Again, given that important research in psychology and American politics has proposed alternative mechanisms that employers may influence employees’ trade preferences, future research could also focus on identifying and testing the specific impacts of these mechanisms, which would help to have a more comprehensive understanding of how and when businesses (as employers) influence trade politics. Finally, this article provides the academic community with the opportunity to establish a new universalized individual attitude model for the globalization of the economy to expand the existing theoretical framework for labor market barriers under the changing reality of global labor, goods, services and investment markets.
Vocabulary accumulation
Heterogeneity
heterogeneity
Rent sharing mechanism
rent-sharing mechanism
Translator: Mu Ruotong, a scholar of national politics, majoring in PPE at Renmin University of China, with research interests in international political economy and global governance.
proofreading | Hu Keyi
review | Li Yuan
typesetting | Zhang Yangyang
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