Template-Type: ReDIF-Paper 1.0 Author-Name: Prachi Mishra Author-Name-First: Prachi Author-Name-Last: Mishra Author-Email: prachi.mishra@ashoka.edu.in Author-Workplace-Name: Ashoka University Author-Name: Lorenzo Rotunno Author-Name-First: Lorenzo Author-Name-Last: Rotunno Author-Email: lorenzo.rotunno@IMF.com Author-Workplace-Name: IMF Author-Name: Michele Ruta Author-Name-First: Michele Author-Name-Last: Ruta Author-Email: michele.ruta@IMF.com Author-Workplace-Name: IMF Author-Name: Petia Topalova Author-Name-First: Petia Author-Name-Last: Topalova Author-Email: petia.topalova@IMF.com Author-Workplace-Name: IMF Author-Name: Robert Zymek Author-Name-First: Robert Author-Name-Last: Zymek Author-Email: robert.zymek@IMF.com Author-Workplace-Name: IMF Title: Policies to Facilitate Adjustment to Globalization Abstract: The economic argument for globalization focuses on its aggregate economic gains. While economic models show that society benefits from trade integration overall, they also warn that there could be winners and losers. Economists have tended to assume that those left behind would be compensated or integrated in alternative productive activities. Yet, a vast empirical literature has established that in practice the benefits and costs of globalization have not been evenly shared across different groups of workers, industries, or locations.1 This in turn points to the limited or potentially ineffective use of supportive polices, such as trade adjustment programs, social protection, and place-based (regional) schemes. Globally, the medianspending on active labor market programs, for example, is merely 0.3% of GDP, and 90% of countries spend less than 0.7% of GDP annually on such programs. Emerging markets typify this underinvestment, with annual spending in the bottom percentile of the global distribution. In this chapter, we zoom in on labor market policies as a tool to assist workers in their adjustment to globalization shocks. Specifically, we study the relationship between trade and technology shocks, labor market outcomes, and attitudes toward globalization. The underlying idea is that trade and technology shocks affect labor market outcomes and, in turn, these outcomes shape attitudes. Our interest is to better understand how labor market policies mediate these effects and can be leveraged to facilitate the adjustment to shocks and increase their political acceptability . To this end, we use a recent globalization and trade shock as case studies. The first is the large increase in imports from China in the 2000s across many countries (the so called “China shock”). We study the transmission of this trade shock to labor markets and in turn to trade attitudes; and how the sensitivity to labor outcomes differs depending on policy interventions. The second case study is the emergence of a new, less labor-intensive technology in vehicle production in the form of electric vehicles (EVs). We examine how the switch to producing electric vehicles impacted local labor markets across Europe, and how active labor market policies shaped the employment outcomes of affected workers. This chapter falls at the intersection of three branches of the economic literature. t A large literature examines the effects of trade and technology on labor market outcomes (see, for example, Acemoglu and Restrepo (2020), Artuc et al. (2010), Autor et al. (2016), Dix Carneiro (2014), Dorn and Levell (2022) among others). A related strand of literature studies the backlash to globalization as reviewed in Colantone et al. (2022). Finally, there is a smaller literature on labor market policies and trade, including Bown and Freund (2019), Card et al. (2018), IMF, World Bank, WTO (2017), and OECD (2023). Our contribution is to analyse the role of policy interventions in particular, labor market interventions, in shaping the effects of possibly trade-induced labor market shifts on political attitudes in a cross-country setting. length: 9 Creation-Date: 20250623 Revision-Date: Publication-Status: File-URL:/www/wwwashokaeduin_628/public/dp/RePEc/ash/wpaper/paper149_0.pdf File-Format: Application/pdf Number: 149 Handle: RePEc:ash:wpaper:149