Does Compensating the Losers Increase Support for Trade? An Experimental Test of the Embedded Liberalism Thesis


  • The authors thank Cherie Maestas, Dan Neilson, Stephanie Rickard, Mike Tomz, the editors of Foreign Policy Analysis, and two anonymous reviewers for advice and comments and the Department of Political Science and College of Social Science and Public Policy at Florida State University for financial support. Previous versions of the paper were presented at the 2010 annual meeting of the International Political Economy Society and the 2011 annual meeting of the Midwest Political Science Association.


The political economy of trade literature argues that compensating those who lose from trade is an important component of maintaining public support for free trade, a linkage known as the compensation hypothesis or embedded liberalism thesis. Previous research has found support for many elements of the causal chain underlying embedded liberalism; however, there has been little research on the most crucial element of the causal chain, namely that compensation policies lead to increased support for trade. This article provides a direct test of the compensation hypothesis using a survey-based experiment conducted in the United States that exposes half of the respondents to knowledge of compensation programs and then asks for their opinion on trade policy. The article explores whether knowledge of compensation increases support for trade as well as who is influenced by this knowledge and, thus, provides a crucial test of the embedded liberalism thesis.