Replication for: Electoral Rewards and Punishments for Trade Compensation

When globalization harms a community, voters are expected to demand compensation programs. Why, then, would incumbents fail to provide additional compensation following an economic shock? In this paper, we argue that in addition to offering material assistance, government compensation also informs voters about the costs of globalization, generating consternation in the electorate. As a result, providing compensation can hurt incumbents’ electoral prospects. We study this consternation effect in the United States during the China Shock period. We use an administrative instrument for access to the Trade Adjustment Assistance (TAA) program, the longest-standing compensation system for workers displaced by international trade. Our analysis shows that compensation electorally backfires when distributed to low-shocked regions where the informational value of compensation is high. The consternation effect can explain why governments often under-invest in compensation programs.