Hiscox: Inter-industry factor mobility and the politics of trade

Hiscox. 2001. Inter-industry factor mobility and the politics of trade. International Organization 55 (winter): 1-46.

THE THEORY:

"... I apply the standard economic theory of trade to highlight the importance of inter-industry factor mobility--that is, the ease with which owners of factors of production (land, labor, and capital) can move between industries in the domestic economy. If factors are mobile between industries, the income effects of trade divide individuals along class lines, setting owners of different factors (such as labor and capital) at odds with each other regardless of the industry in which they are employed. If factors are immobile between industries, the effects of trade divide individuals along industry lines, setting owners of the same factor in different industries (labor in the steel and aircraft industries, for example) at odds with each other over policy." (page 2)

Main argument involves asset specificty (X): If my factors (capital or labor training) are immobile, than a sudden increase in trade increases the competition I face, but I can't leave my industry. E.g.: Steel mills. Owners and workers of steel mills both favor protection. But if factors are mobile, than a sudden increase in trade isn't a big deal; even if my industry is threatened, I can just leave it and do something new.

HYPOTHESES AND VARIABLES:

High factor mobility --> class alliances

Low factor mobility --> industry sector alliances

PLACE IN THE LITERATURE/THEORY:

Rogowski (1987) argued that changing exposure to trade could affect domestic political coalitions. His result was based on the Samuel-Stolperson theorem which says that increased trade benefits holders of abundant resources and hurts holders of scarce resources. This argument assumes perfect factor mobility (i.e. a factor like steel is perfectly mobile between industries). Thus, Rogowski concluded that political coalitions for/against trade would form along a rural-urban or class-based cleavage depending on a state's relative abundance of land, labor, and capital. There's a competing economic theorem, though. The Ricardo-Viner model assumes perfect factor IMmobility, which changes the results: owners of factors tied to export industries will benefit from expanded trade. Under this theorem, you would never expect rural-urban or class-based political cleavages to form around trade issues; you would expect industry-based cleavages.

Hiscox's main contribution is to tie the two theories together, using factor mobility as the main independent variable. "Allowing that factors can have varying degrees of mobility, the simple prediction is that broad class-based political coalitions are more likely where factor mobility is high, whereas narrow industrybased coalitions are more likely where mobility is low" (page 4).

EVIDENCE AND MEASUREMENT:

Lots of discussion of this. I understood the entire theory from the first four or five pages. Thirty or forty pages of evidence followed, with detailed analyses of several countries (US, UK, France, Sweden, etc.) included.

CONCLUSION:

Of course he's right. He acknowledges several variables that he has not considered, as well as some important assumptions he made that could change the results if relaxed (e.g. no international factor mobility). Also, he recognizes that political regulation of the economy affects factor mobility, which suggests a possible endogeneity/reverse causation problem.