Download Party Politics and Preferences for CAFTA in Costa Rica

Globalization and Domestic Politics:
Party Politics and Preferences for CAFTA in Costa Rica
Raymond Hicks
Helen V. Milner
Dustin Tingley
Princeton University
October 2008
v. 1.2
Abstract
Preferences over trade policy among citizens in developed countries have been amply
researched, but we know decidedly less about public preferences in developing countries. How
strong of an impact do economic factors have on public preferences? Can political leaders and
parties affect domestic preferences for openness? We analyze public opinion data and the results
of a public referendum on the Central American-Dominican Republican Free Trade Agreement
(CAFTA-DR) in Costa Rica. We consider the influence of both economic and political factors.
Controlling for economic factors, we isolate the effects of political parties on the referendum
vote. We find that at least one party appeared to influence voters independent of their economic
interests. In sum we offer an overview, conceptual framework, and preliminary empirical
analysis on the first public referendum in a developing country on a free trade agreement and
hence provide an important window into the domestic politics and economics of globalization.
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I. Introduction
Over the past three decades, many developing countries have chosen to liberalize their
trade regimes. Often this policy change has meant unilateral tariff liberalization followed by
multilateral liberalization involved in joining the WTO and then further liberalization through
preferential trade agreements (PTAs). This liberalization process has involved a striking change
in policy from earlier periods of import substitution industrialization (ISI) policy. Efforts to
explain this policy change have focused on changes in political institutions, in particular
democratization (e.g., (Eichengreen and Leblang, 2007; Milner and Kubota, 2005)), changes in
the ideas of policy makers (e.g., (Sikkink, 1991)), economic crises (e.g., (Haggard and Kaufman,
1995)), the pressure of external actors such as the US and the international financial institutions
(e.g., (Stallings, 1985)), and changes in public opinion within developing countries (e.g., (Baker,
2003; Stokes, 2001; Weyland, 2002)). In this paper we seek to explain preferences for openness
in developing countries by closely examining the experience of one such country, Costa Rica.
Costa Rica is an interesting case for studying this change in policy. Since the mid-1980s
it has engaged in a program of trade liberalization which included joining the GATT in 1987 and
negotiating a series of PTAs in the late 1990s. In 2002, it launched the biggest PTA negotiations
it had considered with the start of Central American-Dominican Republic Free Trade Agreement
(CAFTA-DR) talks. After all of the countries signed the agreement in May 2004, Costa Rica had
a difficult time ratifying the accord. It took over three years for the government to find a way to
accept it by turning to the public itself for ratification.
On October 7th, 2007, Costa Rica held a nationwide referendum on the Central AmericanDominican Republic Free Trade Agreement (CAFTA-DR). The referendum, the first of its kind
in a developing country, provides an opportunity to consider the role of domestic politics in
2
shaping how countries engage with an increasingly globalized economy. The agreement passed,
but by a razor thin margin, 51.56%-48.44% with a turnout of 59.2% of the eligible population. It
also became a critical issue in the 2006 presidential campaign as the main Costa Rican parties
competed against one another by taking different sides on the CAFTA agreement. The CAFTA
agreement almost failed in Costa Rica, which would have been an unusual outcome. Politics,
especially party politics, played a substantial role in affecting the outcome.
We use the Costa Rican referendum on CAFTA to ask about the sources of support for
globalization in developing countries. We ask who supported and opposed CAFTA, and why
they did so. Using the referendum results and various public opinion surveys in Costa Rica, we
consider whether political parties had an effect on voting independent of economic sources of
preferences. Doing so requires that we delve not only into the details of Costa Rican party
politics, but also into the details of the CAFTA agreement in order to establish its economic
effects. We show that at least one of the political parties, the PLN, was able to significantly
influence voter preferences.
A large debate exists over whether, especially in democracies, publics have well defined
preferences that shape how policy makers act (so called “bottom up” approaches), or whether
elites (here, parties) have significant abilities to shape public preferences (“top down” models).
The interaction between political elites and public opinion has been at the center of public
opinion research for many years (e.g., (Bartels, 1991; Druckman and Lupia, 2000; Kinder, 1998;
Zaller, 1992). Much of this debate has turned to showing more clearly how both processes are at
work (e.g., (Baker, 2008; Canes-Wrone, 2006; Erikson et al., 2002; Gabel and Scheve, 2007). On
the one hand, publics may come to understand their policy preferences as a result of how they
believe economic policies will affect their material well being. Given their economic position,
3
individuals will calculate how different policies advantage or disadvantage them, thus shaping
their preferences. These preferences, aggregated as public opinion then, may affect how elites
frame debates and choose policies. On the other hand, elites through their greater informational
advantages may be able to use rhetoric or other communication strategies to condition how
individuals view policies and their consequences. Of course both of these processes may be
occurring simultaneously. The literature has been sensitive to this endogenity for a long time
(Bartels, 1993) and to the many methodological issues raised by it (Gabel and Scheve, 2007).
In this paper we examine the role of both bottom up and top down forces in shaping
preferences toward CAFTA in Costa Rica.1 Our paper is structured as follows. First, we provide
some political history about the referendum. Second, we characterize the economic
consequences of Costa Rica becoming part of CAFTA-DR. We show that the type of
liberalization ushered in by CAFTA-DR is unlikely to satisfy certain assumptions about trade
liberalization made by the commonly used Heckscher-Ohlin (HO) model of trade. We provide an
answer to the puzzle of why HO models predict patterns of support for liberalization poorly in
developed countries (Beaulieu et al., 2005): particular instances of liberalization may not
advantage owners of the more abundant factor in a developing country. More importantly, these
calculations identify the nature of economic preferences in Costa Rica (bottom up preferences)
which, once controlled for, allow us to better demonstrate the effect of political parties (top down
forces). Finally, like other referendum analyses (Markowski and Tucker, 2005), we test our
hypotheses about who supported and who opposed CAFTA-DR in Costa Rica using surveys as
Several other influences often cited in the literature do not seem to apply to this case. For instance, changes
in domestic institutions, economic crises and the role of IFIs seem much less pertinent. Costa Rica has been
considered a democracy since the 1940s; its political institutions have not changed much since it began a
program of trade liberalization in the mid 1980s. Further, Costa Rica experienced a grave economic crisis in
1982 but has not been through another one since then.
1
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well as canton level referendum vote returns. Hence we report both individual and aggregate
level results linking economic and political characteristics to preferences over trade
liberalization.2
The analyses presented help us to better understand trade relations between developing
and developed countries. We emphasize the way political factors shaped support and opposition
in Costa Rica, and hence provide a unique window into how globalization interacts with
domestic forces to shape trade agreements. Our study also provides a thorough analysis of the
type of regional free trade agreements that are becoming increasingly common and, according to
some spectators of the recent collapse of the Doha talks, could replace the WTO. If norms of
democratic participation, and in particular the use of referenda, continue to grow, then the Costa
Rican experience could be an important leading indicator of what we should expect in other
developing countries.
II. Costa Rican Party Politics and CAFTA-DR
The use of a referendum to decide on CAFTA-DR was not required by the Costa Rican
constitution and instead came out of a political process involving Costa Rica’s parties and its
executive, legislative, and judicial institutions. Negotiations for Costa Rican participation in
CAFTA-DR began under President Dr. Abel Pacheco of the Social Christian Unity Party
(hereafter PUSC) in 2003. Despite reservations by the Costa Rican negotiators (Borges 2004),
Costa Rica signed the agreement in 2004. However, instead of sending the agreement to the
legislature and risking the ire of labor unions (Zueras, 2007), the president delayed any action.
By 2006 new presidential elections were in full swing and CAFTA-DR became an important part
of the presidential campaigns (Economist, 2006). Oscar Arias of the National Liberation Party
2
Unfortunately our key individual level survey did not report geographic information allowing us to link the two
together and estimate models that can better avoid ecological inference problems.
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(PLN) vigorously supported the agreement, while Otton Solís of the relatively new Citizens’
Action Party (PAC) opposed it. (Economist, 2006; Wilson, 2007). Arias won the Presidential
election, and the PLN took this as a mandate that the public supported CAFTA-DR. But amidst
much contestation the Costa Rican Supreme Court announced that it might be possible to hold a
public referendum. The government chose this route and began an intense campaign for public
support, which ended with the referendum barely passing at the end of 2007.
It is perhaps odd that the historically dominant left party in Costa Rica, the PLN, chose to
advocate for CAFTA-DR. Its early rhetoric and policy favored state intervention in the economy
and economic redistribution in favor or working or lower class citizens (Booth, 2007, pg. 328329). During the 1980’s and 1990’s, however, the PLN supported trade liberalization and other
neoliberal reforms. At least two key features have been offered to help explain this change in
program. First, in 1982 Costa Rica experienced a serious financial crisis and received help from
the IMF, and in return the PLN agreed to a policy program involving fiscal austerity,
privatization and liberalization. While some suggest this program was imposed upon Costa Rica
by the IMF and its creditors, others note that this change was due largely to domestic politics
within the country and especially to party politics within the PLN (Booth, 2007, pg. 314,329;
Wilson, 1994, 1999). The PLN combined this package later on with a series of compensation
measures, much like those emphasized in other literatures on “embedded liberalism” (e.g.,
(Ruggie, 1982)), which enabled it to maintain its social democratic label in its competition with
the more conservative, PUSC.
Second, the electoral system in Costa Rica has been such that PLN could ignore the
electoral promises it made to not engage in the structural adjustment policies and liberalization
that could hurt its lower class electoral base because no viable competitive parties existed to
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challenge its hold on the left. “PLN voters who become disgruntled when the party in
government is either unwilling or unable to follow through on its campaign promises find that
there are no credible alternative parties to the left of the PLN” (Booth, 2007, pg. 761).3 Between
1970 and 2002, the PLN and PUSC exerted a virtual duopoly on government in Costa Rica, and
indeed the PLN played the role of monopolist most of that time.
In 2002 and then especially in 2006, this two party system broke down. Tensions within
the PLN after two decades of neoliberal policies led to the creation of the PAC, which cleaved
off of the PLN and challenged it from the left. With the PAC‘s shockingly strong showings in the
2002 and 2006 elections, the party system seemed to be changing. In 2006 the PAC did even
better and the Christian Democrats (PUSC) almost disappeared totally. While the PLN won the
2006 elections, they now faced a new, popular party on their left that hotly challenged their
neoliberal policies.
Given that Costa Rican parties are often fragmented and not strong since their members
cannot generally be reelected (Wilson, 1999), does this weakness extend to their ability to
influence the electorate? Or did political parties play a crucial role in motivating support or
opposition to CAFTA in referendum voting?
III. Costa Rican Trade and CAFTA-DR
We examine the details of the agreement in order to understand its distributional
consequences and thus to identify which groups in Costa Rica should support and oppose it on
purely economic grounds. Specifically, how will CAFTA-DR help or hurt different groups in
3
The prevailing two-party system in Costa Rica during this period was at odds with theoretical expectations based
on the fact that Costa Rica is a closed list proportional representation system. Wilson suggests that the lack of viable
multiple parties is likely attributable to other electoral laws, like the fact that the President needs 40% of total ballots
to avoid a run-off.
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society? Once we have identified the economic interests of groups, we can investigate how and
if party politics reshaped these preferences.
Since the main models of the distributional effects of trade involve relative factor
endowments, we focus attention on how the agreement actually affects different sectors of the
economy and the returns to different factors, such as skilled and low-skilled labor. We argue that
the benefits from CAFTA-DR will accrue largely to high-skilled workers and the costs will be
disproportionately borne by low-skilled workers.4 We consider several different sources of these
costs and benefits: tariffs, trade-related safeguards written into the agreement, and the
telecommunications provisions written into the agreement. 5
Tariffs
The aggregate effect on workers of tariff changes on US products in Costa Rica and on
Costa Rican products to the US is ambiguous. Once CAFTA-DR goes into effect for Costa Rica,
Costa Rica’s tariff rate on all products from the US will be cut in half, from about 6.3% to 3.2%.6
4
In this paper, we use an occupational status measure that measure indicates the extent to which an occupation maps
individual education to income based on the ‘International Social Economic Index’ (ISEI) as a proxy for skill level
for several reasons. First, the measure differentiates across occupations on the basis of how much human capital is
required. As a result our proxy measure correlates at a very high level with alternative measures, such as educational
attainment. We assume that high status occupations, which by definition are filled with highly educated workers
earning large incomes, are ones with high level of human capital. Low status occupations are assumed to be
unskilled labor. Second, because the trade agreement is written in terms of specific industries, alternative skill
measures such as education have little direct correspondence with the terms of the agreement. Hence our skill proxy
is a superior measure given our substantive focus.
5
Although CAFTA-DR involves seven countries, the agreement is really between the United States and each of the
six Central American countries. Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua are already involved
in the Central American Common Market (CACM) which, as a group, signed a free trade agreement with the
Dominican Republic in 1998. By 2004, the average tariff rate between Costa Rica and other CACM countries was
less than .01%. The tariff rate on imports from the Dominican Republic was 1.2%. In contrast, the average most
favored nation rate in Costa Rica—the rate that would apply to the US—was 6.3%. So goods from the US would be
most affected by a trade agreement that reduced tariff rates. Moreover, of the countries involved in CAFTA-DR, the
United States is by far Costa Rica’s largest trading partner. In 2004, about 16% of Costa Rican exports went Central
America while 45% went to the United States. Similarly, 45% of Costa Rican imports were from the United States
compared to less than 5% of imports from Central America. Finally, the non-trade-related aspects of the agreement-the investment, labor, intellectual property rights, and telecommunications provisions which critics were most
vociferous in their opposition to--were included at the insistence of the United States.
6
The average tariff rate once CAFTA-DR goes into effect was derived by combining the 2005 Costa Rican tariff
schedule with the schedule of tariff cuts mandated by CAFTA-DR. The schedule of reduction was then applied to
8
The trade-weighted tariff on US imports in Costa Rica is 3.1% and will drop to 1.8% under
CAFTA-DR. In comparison, the pre-CAFTA-DR tariff rate on Costa Rican products into the US
was 5.1% which will decrease to 0.4% after CAFTA-DR goes into effect. Weighted by trade, the
pre-CAFTA rate is 3.9% while the post-CAFTA rate is 0.3%.7
Overall tariff rates hide sectoral variations in tariff rate cuts which may affect support for
the agreement. Workers in sectors that are subject to a larger decline in tariffs may be less likely
to support the agreement because they will suffer more from the cuts. To examine which sectors
would be the biggest winners and losers from the agreement, we concentrated on the industries at
the 2-digit harmonized system level that comprised at least 2% of total imports from the US or
exports to the US.
Costa Rican tariffs on US imports. We identify 10 industries that made up 76% of Costa
Rica’s imports from the United States in 2005, representing a range of products from agriculture
to labor intensive to human capital and technology intensive. The list of the top 10 industries and
their proportion of imports and tariff rates are available in Table 1. Pre-CAFTA-DR Costa Rica
imposed the highest tariff rates on low-skilled labor and agricultural products from the US.
These industries will also experience the largest decline in tariffs once CAFTA-DR goes into
effect. The pre-CAFTA-DR rates on both knitted and non-knitted apparel items were about 15%
which will drop to 0% once CAFTA-DR goes into effect, giving domestic workers competing
against US apparel a strong incentive to oppose CAFTA-DR. CAFTA-DR will also cut the tariff
for the cereal industry from 12% to 3.85%. In contrast, the industries using high-skilled labor had
lower tariffs pre-CAFTA and, for the most part, were able to maintain their tariffs after CAFTA
the 2005 tariffs to obtain a tariff rate for the first year after CAFTA-DR goes into effect. To get an aggregate rate,
this tariff rate was averaged across all tariff lines.
7
The US tariffs are calculated using the MFN rate rather than the Caribbean Basin Initiative rate because it was
uncertain whether the CBI would be renewed (Morley, 2006).
9
goes into effect. Electrical machinery (HS 85) and mechanical appliances (HS 84), for example,
had pre-CAFTA rates of 3.4% and 1.3%, respectively, and would maintain post-CAFTA rates of
2.7% and 1.1%.
US tariffs on Costa Rican imports. Turning to Costa Rican exports to the United States,
we identified 8 industries that comprised a little more than three-quarters of Costa Rican exports
to the United States. Costa Rica’s export mix has been changing in recent years, so the eight
industries represent not only agricultural products (edible fruits, coffee, and rubber) and low
skilled labor (articles of apparel), but also technology-intensive goods (instruments, machinery,
and electrical machinery). Following Morley (2006) we calculate the tariff rate that would apply
in each of these 8 industries in the absence of the Caribbean Basin Initiative and what the
resulting tariff will be after CAFTA-DR passes in Table 2.
Low-skilled labor industries exporting to the US face higher tariff rates than do skilled
labor industries.8 The two textile categories have, by and far, the highest average tariff rates at
15.1% for knitted apparel and 12.4% for non-knitted apparel. In contrast, the average tariff rate
on the leading high skilled industries such as precision instruments (HS 90), electrical machinery
(HS 85), and mechanical appliances (HS 84) all had pre-CAFTA tariff rates of less than 2%.
Once CAFTA-DR goes into effect, the US tariff rate for all of these industries will be reduced to
0%. Because the low-skilled industries faced higher tariff rates pre-CAFTA, the change in the
tariff rate will be much greater for them than for the high-skilled labor.
Overall, then, the economic effects of CAFTA’s tariff changes are a little unclear, but our
data suggest that low-skilled and agricultural workers will bear the brunt of the impact. Lowskilled workers will see the largest reductions in tariff rates on US imports, while the declines in
tariffs on skilled industries will be relatively small. US imports in these low-skilled labor
8
Tariff rates on bananas and coffee, two of the largest Costa Rican exports, are both 0%.
10
industries will thus be cheaper than before, creating more competition in these industries and,
perhaps, driving down wages. At the same time, the tariff rate changes on Costa Rican exports to
the US appear to favor low-skilled workers as their industries will see the largest decline in tariff
rates of the major industries exporting to the US. Are the changes in Costa Rican tariffs
concentrated in certain cantons or are they spread out across the country?
To tie the changes in sector-level tariffs to canton-level data, we created a proxy for preand post-CAFTA average canton-level changes in tariffs, based on employment data from the
census.9 Because there is no trade data available at the canton level, we proxy the levels of
imports with the number employed in an industry on the assumption that cantons with a larger
proportion of employment in an industry would be more affected by an industry’s trade
liberalization. The tariff rate for each industry was multiplied by the canton-level employment
data for the industry and then divided by total employment in the tradeables sector within the
canton. This measure was then summed within each canton to get an aggregate tariff measure. So
if a canton only produced rice and textiles and employment was split evenly between them, the
measure would be constructed by multiplying .5 by the tariff rate in textiles and then adding the
product of .5 and the tariff rate of rice. If the rice tariff if 36% and the textile one is 12%, the
canton weighted average would be 24%.
This measure should provide some indication of the impact trade liberalization will have
on the canton. Cantons that have more employment in industries most affected by trade
liberalization will be highlighted by both our proxies. Our supplementary materials display
estimates of these tariff changes across cantons.
9
For both measures, each employment code used by the Costa Rican census was classified as tradeable or
nontradeable. All tradeable employment was then classified in a harmonized system code at the 2-digit level to
allow the employment data to be merged with the tariff data.
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There are significant differences in the tariff changes across cantons. To further
investigate these canton differences, we compare the tariff change measures with our proxy
measure of the average skill level within a canton. Cantons with a high percentage of workers in
low skill occupations were more likely to face steeper tariff cuts (supplementary materials). OLS
models of the bivariate relationship between skill levels and tariff reductions show that using the
straight difference in tariff changes generates an r2 of .70, and the model with percentage tariff
changes an r2 of .43. These results suggest a very strong (linear) relationship between prospective
tariff cuts and canton skill levels. They imply that import tariff changes varied given the factor
endowments of the industry, and seem to show that trade barriers were reduced most on
industries using unskilled labor. While economic theory typically predicts that unskilled workers
in a developing economy are likely to be made better off by trade liberalization, in Costa Rica
they were likely to face the biggest decreases in trade protection from CAFTA and thus the
largest surges in imports, suggesting that they may have been most opposed to CAFTA-DR.
Safeguards
Agricultural sectors of the economy that produced for the domestic market and competed
against imports feared that the liberalization from CAFTA would increase imports from the US
(Dickerson, 9/21/2007; Murphy, 10/01/2007). These sectors, which include rice, poultry, pork,
dairy, onions, potatoes, and oils, were among the most protected agricultural industries in Costa
Rica pre-CAFTA, with tariff rates ranging from 30 to 50% (also see Francois, Rivera, and RojasRomagosa 2008, p. 49). They lobbied the Costa Rican government hard to be excluded from the
agreement. Most secured tariff quota safeguards, albeit weak ones, and onions and potatoes were
excluded from tariff reductions, largely because of fear they would not be able to compete with
the US (Murphy, 10/01/2007). Academic studies on the effect of CAFTA suggest some reason
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for this fear: lower prices will cause dislocation in the staple products, forcing many to seek new
livelihoods (Materer and Taylor 2003; Taylor, Naude, and Jesurun-Clements 2007; Sanchez and
Vos 2007). While the studies conclude that CAFTA will benefit countries overall by lowering
food prices (Taylor et al., 2007), they find that traditional agriculture will suffer because it is
non-competitive. Overall, then, agricultural workers in import-competing industries and in
industries that produce primarily for the domestic market should oppose CAFTA-DR.
High Skill Industries and Multinational Production
Other aspects of the agreement will have a much stronger and positive impact on higherskilled workers, especially the investment and telecommunications chapters. Trade and direct
foreign investment can enhance skill-biased technological change in which relative wages may
change in a country due to the adoption of new technologies (e.g., (Acemoglu, 2003)). If such
technologies are complementary to skills, then workers with these skills will benefit from
increased productivity of these skills and consequently receive increased compensation. DFI in
Costa Rica seems to have followed this process.
In the mid-1990’s, CINDE (the Costa Rican Investment Promotion Agency) consciously
decided to take advantage of Costa Rica’s educated populace and recent trade liberalization to
push for greater foreign investment in technology industries (Mosley, 2008; Rodríguez-Clare,
2001). The push was successful as technology companies such as Intel decided to set up
manufacturing plants in Costa Rica to take advantage of Costa Rica’s proximity to the US when
compared to countries such as India (Dickerson, 3/18/2006). As a consequence, technologyintensive products increased from less than 5% of exports to the US in 1994 to 37% in 1998,
when it surpassed the share of primary products for the first time. From 1998 to 2005,
technology-intensive exports have remained steady at just over 40% of exports while primary
13
exports have stabilized at about 35% of exports (see figure 1).10 The technology companies were
also among the biggest supporters of CAFTA-DR, threatening to leave Costa Rica if the
agreement was not passed since a decision to reject CAFTA-DR would put their operations at a
severe disadvantage versus other similar firms set up in countries that had signed on to CAFTADR. This fact was pointed out a number of times by proponents of the agreement. 11 Thus, the
high-skilled workers who were employed in these types of companies had a strong incentive to
support CAFTA-DR.
Telecommunications Provisions
Finally, telecommunications has been the most highly contentious issue within CAFTADR as it requires the state-run monopoly (Instituto Costarricense de Electricidad, or ICE) to be
opened to competition. A couple of years before the referendum on CAFTA-DR, the government
had attempted to privatize ICE, backing down in the face of mass protests. Anecdotal evidence
suggests that, while general satisfaction with ICE exists, higher-skilled workers may prefer a
privatized telecommunications sector because of the inefficiencies of ICE. Supporters of
CAFTA-DR argued that increased competition would drive down costs making services cheaper
overall, while opponents saw privatization as increasing prices and eliminating government jobs.
A general expectation is that the urban telephone subscriber subsidizes the cost of the rural
10
Using the factor intensity classification from Hinloopen and van Marrewijk
(http://people.few.eur.nl//vanmarrewijk/eta/intensity.htm), we grouped Costa Rican trade with the US into 5
categories: Primary products; Natural-resource intensive products; Unskilled-labor intensive products; technology
intensive products; and human-capital intensive products.
11
Intel launched a mass media pro-CAFTA-DR campaign, at times indicating that a rejection of CAFTA-DR would
make them relocate their operations to countries that had passed the agreement. Anecdotal evidence suggests that
this had some impact: “Pablo Chacon, a 63-year-old former truck driver, said he planned to vote 'yes' because that
would mean more opportunities for his children. "I have children who are studying and one even works for Intel,
and if they took it away, what would my children do?" he said” (AssociatedPress, 2007). Intel CEO Barrett came out
strongly in favor of CAFTA, emphasizing benefits both to the US and the other signatory countries (Barrett, 2005).
“Foreign investors see the TLC as a way to provide more guarantees and transparency. "We see the transparency
and security CAFTA provides for current and future investors as an enabler that will create more employment and
prosperity for Costa Rica," Bill Merrigan, Costa Rica site leader for U.S.-based Procter & Gamble, said earlier this
year.”(InsideCostaRica, 2007)
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consumer as providing service to rural areas is more expensive (DominicanToday, 2006).
Opening up competition, then, may cause costs to increase to rural sectors while decreasing costs
to urban consumers. So we would expect the telecommunications provision to strengthen the
opposition to CAFTA-DR of the rural population, which tends to be low-skilled, while the urban
population, which has a higher proportion of high-skilled labor, should be more supportive.
Review
In summary, all of our different methods of estimating the impact of CAFTA-DR on the
Costa Rican population suggest that the agreement will have distributive consequences: members
of the population with greater human capital will benefit much more from CAFTA-DR than will
members of the population with low skill employment. Tariff cuts will be larger in cantons with
a larger proportion of unskilled workers. While the Costa Rican government negotiated some
safeguards for import-competing agricultural industries, the agreement will still liberalize trade
in these low skill industries with the concomitant fear that they will be overrun by US imports.
Also, the opening of competition in the telecommunications industries may mean that the staterun ICE will no longer be able to subsidize rural phone subscribers with profits from other parts
of their business, increasing costs for rural areas. On the other hand, higher skill workers in
urban areas will see decreased costs of phone service because of increased competition.
Moreover, high skill workers, especially in the technology industry, may gain as multinationals
continue to produce and add new investments in Cost Rica because of CAFTA. In the next
section we will examine how the economic preferences predicted by an examination of the
agreement link up with arguments about how economic preferences link to trade liberalization.
IV. Theoretical Predictions
15
What factors explain an individual’s decision to support or oppose CAFTA-DR? This
paper focuses on the role played by political parties. However, previous works suggest that
economic preferences may also play a key role. Baker, for example, draws out explanations that
emphasize both bottom up sources of preferences (such as the individual’s perceived economic
utility from liberalization) as well as top down sources of preferences (such as the persuasive
role played by political elites). Markowski and Tucker also find a role for both mechanisms in
their study of the 2003 Polish referendum to join the EU (2005). Much research assumes that
individuals understand the distributive consequences of a policy and vote based on their
perception of how it will affect them, or their family or more broadly their country (Balistreri,
1997; Beaulieu et al., 2005; Mayda and Rodrik, 2005; Scheve and Slaughter, 2001). In contrast,
others have suggested that publics do not know their interests very well and political elites can
shape those interests through the rhetoric and incentives that they control (e.g., (Baker, 2008;
Berinsky, 2007; Brody, 1991; Zaller, 1992). We explore both of these perspectives below to
explain referendum voting on CAFTA.
Bottom Up Preferences for CAFTA
The literature on trade policy preferences in developed countries tends to control for the
independent influence of political parties (top down), while focusing on the role of economic
interests (bottom up) (Beaulieu, 2002; Dutt and Mitra, 2006; Milner and Tingley, 2007, 2008;
Scheve and Slaughter, 2001). These bottom up individual preferences over liberalization
arguments tend to draw on the Heckscher-Ohlin theorem from economics which argues that
owners of relatively scarce factors—labor or capital—stand to lose from trade liberalization,
16
whereas owners of abundant factors support liberalization.12 In comparison to the other
developing members of CAFTA, Costa Rica is fairly wealthy and abundant in skilled labor. But
compared to the US, Costa Rica is far less abundant in capital and especially in human capital.
By 2002, Costa Rica’s income per capita was almost $9,000, nearly 50% greater than the rest of
Latin America (Rodríguez-Clare, 2001); its educational attainment was also much higher than
other Central American countries. According to World Bank statistics
(http://www.worldbank.org/research/projects/edattain/edattain.htm ), in 2000 57% of the
population aged 20-29 had at least a 9th grade education. However, Costa Rica’s GDP per capita
in constant dollars was only 12% that of the United States in 2005 ($37,084 for the US compared
to $4504 for Costa Rica), and 87% of the US population aged 25 to 34 were at least high school
graduates. Costa Rica’s labor force is highly skilled for a developing country, but in comparison
to the US it is not.13 If CAFTA is primarily about trade with the US, then trade liberalization
should lead to increasing returns to unskilled labor and decreasing returns to (human) capital in
Costa Rica.
This prediction, however, turns on at least two key assumptions that the previous section
suggests may not obtain. First, it assumes that the pattern of liberalization would be equal across
the economy. As mentioned above, CAFTA did not evenly reduce tariffs across sectors of the
economy. In particular, industries employing low skill labor saw larger tariff declines. Second,
the HO model ignores distortions that foreign direct investment can create if it is highly
complementary to high skill jobs. Costa Rica’s exports to the US have shifted in recent years so
An innovative theoretical model that we do not engage with in this paper is Baker’s argument that Latin American
efforts towards trade liberalization during the 1980’s and 1990’s were driven by consumption tastes instead of labor
market effects (Baker, 2003). Future work will attempt to examine how well Baker’s argument does in our case.
13
In 1985, 9% of Costa Rica’s labor force was categorized as being in professional and technical occupations. In
1999, using a slightly different definition (managers, professionals, and technicians) this percentage had climbed to
15.7% of workers; and as of 2004, this percentage had increased to 23.4% (Mosley, 2008, pg. 696). The
corresponding data for the US are 17.9% in 1998 and 33.8% in 2004.
12
17
that technology-intensive products are more important than either labor-intensive or primary
goods. This has increased the demand for high skill jobs and their wages (Robbins and Gindling,
1999). With CAFTA securing the access of these types of exports to the US economy, it is likely
that exports will grow and so will the wages of these groups.
The data presented in section III and the findings of Robbins and Gindling both suggest
that higher skilled workers were more likely to benefit than lower skilled workers. This was also
a common perception in Costa Rica that the pro-CAFTA PLN worked hard to overcome.
Furthermore, there is evidence that many other developing countries which have liberalized their
trade have experienced gains for higher skilled workers and losses for lower skilled ones
(Goldberg and Pavcnik, 2007). Costa Rica’s experience with CAFTA seems likely to be similar
to other developing countries’.
HYPOTHESIS 1: Cantons with more voters who are employed in relatively low skill
occupations should be most likely to oppose CAFTA.
Top down preferences
Was the outcome of the CAFTA referendum determined by the economic interests of the
median voter who turned out to vote for it? Or were parties in Costa Rican politics able to shape
how voters saw the issue, how they subsequently voted, and influence the outcome of the
referendum? While it might seem odd to claim that elites substantially affected CAFTA
ratification when the agreement had to be placed in front of the public for a referendum vote, it
could still be the case that elites exerted important pressures on citizens (Johnston et al., 1996).
As Johnston et al note for the Canadian elections of 1988 which focused on the FTA with the
US, “[public] opinion shifts on the FTA responded to parties’ rhetorical initiatives. While parties
commonly work to activate interests in their own camp…, they also worked to split other party
camps” (1992: 243). Baker (2008) as well notes that elites can sometimes greatly shape mass
18
opinion toward globalization policies, but for him this depends on how attentive the public is.
Attentive publics are more susceptible to elite rhetoric and party influences. Our question here is
whether parties in Costa Rica were able to use their resources and rhetoric in the CAFTA debate
to influence voters in distinction to what their economic interests would have dictated.
The literature on party influences suggests a number of mechanisms that parties might
use to influence voters. Key concepts from this literature are cueing and framing. Cueing Parties
provide cues to party members (Hobolt, 2006; Lau and Redlawsk, 2001; Lupia and McCubbins,
1998). Individuals are aware of their general proximity of their preferences to those espoused by
the parties, but not necessarily their proximity to particular policies. Cues from parties thus serve
a heuristic role for voters, giving them information about how to vote on a complex policy
choice. Individuals that share a party’s economic preferences might still be uncertain about how
those preferences translate into particular policy choices. Given political affiliation by voters and
voter uncertainty, parties can play an informational role, sending a signal of how one should vote
on a referendum (Christin et al., 2002). Such cueing and information provision is likely to be
very important in our case precisely because of the complexity of the CAFTA-DR agreement,
where the ‘winners’ and ‘losers might not be clearly defined.14 Framing Parties, or other elites,
can emphasize particular features of a referendum, causing voters to evaluate the merits of the
referendum in specific ways (Chong and Druckman, 2007). More abstractly, parties can cast a
referendum proposal as being close to the position of the median voter while casting the
reversion point (i.e., a rejection of referendum) as representing an extreme position (Hobolt,
And even if everyone knows that an agreement will create more ‘winners’ than ‘losers’, individual uncertainty
about whether one will be a winner or loser can induce voters to vote ex ante against liberalization in which a
majority ex post would be ‘winners’ (Fernandez and Rodrik, 1991).
14
19
2006).15 On this account parties in favor of CAFTA-DR could 1) clearly publicize party position
on the agreement so voters know the party’s position, 2) work to frame the agreement as being
efficiency enhancing (would be better for the country as a whole) and rejection as costly for the
country, and 3) frame the agreement in particular ways tailored to particular groups of people.
Opposing parties might be expected to argue the opposite of 1 and 2, but still try to tailor
messages.
In the Costa Rican case the Arias administration and the PLN appears to have actively
engaged in cueing and framing through mass media and other avenues.16 Arias PLN clearly
endeavored to establish that CAFTA-DR would be good for the country as a whole (Villalobos,
2007), and made sure to frame the agreement in a way that emphasized that it would not disrupt
social spending (Canal6, 2007). The PLN reiterated their position repeatedly on CAFTA-DR, in
a way that both stressed efficiency improvements but also in a way that tried to ameliorate
individual level uncertainty. Furthermore, the PLN also worked to bring their message to
particular sets of workers, hence providing tailor made frames. Pro-CAFTA-DR rallies were held
at particular industrial parks and messages were tailored to these populations, often times
stressing the role of FDI in providing for their jobs (Morales-Mateluna, 2007; Valverde, 2007).
And when the PLN campaigned in rural, agricultural, areas, they framed CAFTA in terms of
having beneficial consequences on consumer prices (Valverde, 2007). The PAC opposed passing
15
Hobolt also argues that parties can make the uncertainty surrounding a proposal less than the uncertainty
surrounding the reversion point. If voters are risk averse over economic policy—and abundant experimental
evidence suggests that people are generally risk averse—voters will penalize outcomes that are framed to have
higher variance and reward outcomes that are framed to have more certain outcomes.
16
Key planks of the Yes campaign’s strategy were the formalized involvement of the PLN and a mass media
campaign (Chacon and Chacon, 2007). The extent of their efforts even incited charges of illegal campaigning in the
days prior to the vote which was outlawed by article 85(g) of the electoral code. One such purported violation was
the Arias administration’s decision to broadcast US Trade Representative Susan Schwab’s statement about the
(negative) economic consequences to Costa Rica if the agreement was rejected.
20
the referendum and instead wanted to renegotiate the treaty, and hence gave a much more
ambiguous ‘cue’ to their members.
Did political parties try to make their proposals seem more likely to succeed and closer to
the interests of median voter while portraying the alternative as more extreme and very negative?
The PLN repeatedly argued that rejecting CAFTA-DR would lead to large negative
consequences for the country because of its deleterious effects on FDI. At pro-CAFTA press
conferences held at industrial parks where Costa Ricans worked for foreign multinationals, PLN
speakers suggested that the US was going to cut off trade preferences if Costa Rica did not pass
CAFTA and that MNCs would pull out or not invest so jobs would disappear.17 Hence the PLN
actively tried to campaign on a platform that emphasized the negative, making the ‘reversion’
policy seem more extreme. While the PAC played an important role in the “No” campaign, they
expended less resources campaigning on CAFTA and instead relied more on other societal actors
to influence voters.
This contrast between the PLN and PAC suggests that organizational differences across
parties might make some parties more influential than others. Despite early levels of
organization, and in contrast to the PLN, the PAC had only a thin organization in the country’s
rural areas. Solon, in March 2006, said, “…we did not see with crystal-clarity that our great
weakness was in the outlying areas…we lacked an organizational force and this is decisive…we
need to greatly improve in territorial structure” (Murillo, 2006b). In contrast, scholars have
remarked on the deep and developed organization of the PLN (Booth, 2007, pg. 321).
How might organizational differences translate into differential influence? First, better
organized parties might be more effective in cueing and framing. Second, national parties with
17
The presumptive targets here were workers whose economic livelihoods might be imperiled if there was a decline
in FDI. While some of the workers may very have been high skill workers that already saw CAFTA-DR as
advantageous, there were certainly instances of pressure at lower skilled installations (Zueras, 2007).
21
highly integrated geographic coverage can put pressure on local party officials who could then
directly lobby their constituents. The PLN was known to have extensively used its electoral
organization prior to the referendum.18 Even direct pressure on canton mayors from the Costa
Rican Vice President Kevin Casas was used. 19 The PLN, due to their organizational capacities,
took nationally formulated policy positions and had local party operations distribute these
messages. The PAC, on the other hand, chose to let the anti-CAFTA groups from civil society
lobby. It was much less well organized since it was a new party, and had little local electoral
clout compared to the established PLN. Finally, the PLN organized a massive (~375,000 person)
bussing to polls operation, especially in rural areas (Fallas, 2007). Efforts like this might not
influence individual preferences in the way cueing or framing might, but they can certainly
influence outcomes.
Based on these mechanisms, we hypothesize that political party activities played a strong
role in the referendum. The above qualitative evidence suggests that while the PLN engaged in a
sizeable organizational and informational campaign, the PAC likely played a smaller role, as
they were less organized and gave voters a more ambiguous cue about where they stood on trade
liberalization. This leads to our three main hypotheses.
18
During a May and September 2007 recess, 25 PLN deputies promised to return to their regions to campaign for a
Yes vote on CAFTA, to designate local leaders who would act as ‘multipliers’ to get out Yes votes (Venegas, 2007;
Vizcaino, 2007). The PLN ran a campaign for the referendum that was parallel to efforts of the Pro-CAFTA
movement (comprised of business and other interests).
19
In the weeks prior to the referendum vote an internal memo from was leaked that detailed several strategies for
ensuring a pro-CAFTA-DR outcome. One of these strategies was to threaten municipal mayors that their funds
would be decreased unless they delivered a pro-CAFTA vote in their cantons. “But more needs to be done,
particularly with the 59 PLN mayors. They must be made responsible for the campaign in each Canton and it must
communicated to them, with all crudeness, a very simple idea: the mayor that does not win his Canton on the 7th of
October is not going to receive any government (funds) in the next three years. The same reasoning can be applied
to aldermen, who can be made responsible for specific districts. In the latter case, they must be reminded of their
personal aspirations: winning the referendum depends on them having real possibilities to continue being aldermen
or to become mayors or deputies” (Chacon and Chacon, 2007). There were claims that the threats were effective
(Fonseca, 2007).
22
HYPOTHESIS 2: Controlling for economic factors that affect preferences, there will be
significant differences in individual support across members of pro- and anti-CAFTA
parties.
HYPOTHESIS 3a: Controlling for economic factors that affect preferences, the PLN will
have a larger influence on individual voter preferences than the PAC.
HYPOTHESIS 3b: Controlling for economic factors that affect preferences, cantons
where the PLN was especially successful at winning votes and organizing prior to 2007
are the ones most likely to support CAFTA.
V. Empirical Evidence
Can we identify the effect of parties on the CAFTA referendum in a systematic way? To
empirically evaluate the competing effects of bottom up and top down preferences, we analyze
both individual level survey data and aggregate level referendum results (Markowski and
Tucker, 2005). Both data sources help us see whether our qualitative evidence paints a realistic
picture of the Costa Rican referendum. But identifying the causal effects of parties is quite
difficult, and we note the limitations of our study.
Survey Analyses
In this section we explore with individual survey data the correlates of preferences
toward CAFTA. That is, we ask whether at the individual level survey results show that attitudes
toward CAFTA were affected either by economic factors like relative factor endowments or
party affiliation. We want to see whether bottom up or top down influences on individuals
mattered. As is well known, however, there are numerous problems with associating causality
with cross sectional survey analysis. As Gabel and Scheve (2007, pg. 1014) note,
The natural starting point for estimating the effect of elite communication on mass political opinion is
estimates of the contemporaneous (partial) correlation between some measure of the former and the
latter. These correlations, however, may be poor estimates of the causal effect of elite communication
on opinion for numerous reasons, including poor measurement of the theoretical concepts
(measurement error), failure to account for other unobserved or unmeasured determinants of opinion
(omitted variable bias), and ignoring the possibility that opinion may be an important determinant of
communication (endogeneity). In short, estimating the effect of elite communication on mass political
23
opinion using contemporaneous (partial) correlations is especially vulnerable to the usual limitations
of cross-sectional analysis of observational data.
We use a variety of methods to examine the role of economic factors and parties. None of these
methods alone is perfect, but together they strongly suggest that elites and parties could have an
important impact on public preferences for CAFTA.
Public opinion on trade policy is well documented in developed countries (Hays et al.,
2005; Johnston et al., 1992; Scheve and Slaughter, 2001). In these studies, a common individual
level factor influencing support for trade is the respondent’s skill level. For some this is taken as
support for standard economic models. Individuals in capital abundant countries that are highly
skilled should favor trade, while those individuals with lower capital endowments should oppose
trade. In theory, this relationship should taper off in countries with lower capital endowments.
Cross-nationally there is some evidence that this happens (Mayda and Rodrik, 2005). However,
we know much less about patterns of public support in developing countries, and some studies
find that in Latin America low-skilled workers are never more favorable to trade than high skill
workers (Beaulieu et al., 2005). This section focuses on public opinion on CAFTA-DR in Costa
Rica in order to assess whether attitudes toward CAFTA were affected by individual skill levels
and/or party affiliation.
Our survey data come from one done by the Universidad de Costa Rica’s Escuela de
Estadistica and Centro de Estudios de Opinion, which focused specifically on public opinion on
CAFTA-DR (we label this survey Universidad). The two waves of the survey, one in July and
one in September of 2007, used telephone interviews and were nationally representative with a
combined 1428 respondents.20 This survey data helps us get a better idea of preferences for
20
Two surveys represent the entire sample of public opinion surveys conducted in Costa Rica that asked questions
on trade liberalization, were conducted within 3 years of the referendum, and also asked questions about respondent
demographics, etc. A second survey was conducted by the Latin American Public Opinion Project (LAPOP) in 2004
as part of a multi-country survey in Latin America. The LAPOP survey had 1500 respondents and used a three-
24
CAFTA-DR in Costa Rica, but we try to be clear about the limitations of our inferences given
the nature of survey data.
Dependent Variables
The Universidad survey asked four questions that give a good indication of an
individual’s preference over CAFTA-DR. FavorOpposeCAFTA asked respondents how much
they favored CAFTA on a scale of very opposed (0) to very favorable (4) and was asked on both
surveys. PositiveNegBalanceCAFTA asked respondents whether they thought on balance
CAFTA would be good or bad, with responses ranging from very bad (0) to very good (4) and
was asked only on the July survey. We focus on these two questions, and report results for a
question on perceived impact on family and vote intention in our supplementary material (results
were very similar). For all of our questions we code higher categories as pro-CAFTA responses.
Independent Variables
We estimate models with a set of independent variables that a number of other scholars
looking at trade support use: individual factor endowments, political preferences, gender, and
age (Scheve and Slaughter, 2001). Additional variables, such as general preferences for
international engagement or cultural attitudes (Hainmueller and Hiscox, 2006; Margalit, 2006),
were not available in our surveys. For the Universidad survey we proxy factor endowments
through either educational attainment or income level. We implement both measures with
dummy variables, omitting the lowest category as the reference, so as to make the least
stage probabilistic sample in two stages and by quotas in the final stage to obtain a nationally representative sample.
We find nearly identical results using the LAPOP survey and provide these results in supplemental materials.
25
parametric assumptions. For political preferences we use dummy variables for the political party
of the President that the respondent voted for in the 2006 election.21
We implement these dummy variables in two different ways. First, we estimate models
where the omitted variable is the main opposition party: the PAC. This allows us to identify
cleavage effects across parties, i.e., given what we know about party positions, how much
separation occurred between the main pro- and anti-CAFTA parties. If parties in general played
little role, then we should expect very little difference in the coefficients for members of different
parties. Similarly, we also estimated a model where we grouped parties into two camps: all those
voting for a pro CAFTA-DR party (PLN, PUSC, Libertarian) and those voting for an anti
CAFTA-DR party (PAC). Second, we estimate a model where the omitted party variable is the
category where someone did not vote for the President. This gives a rough sense of how much
separation the PLN and PAC were able to generate versus those that did not support a
Presidential candidate in 2006 and hence were less invested in a political party. This is, of
course, a rough test of the relative influence of the parties and such results should be interpreted
with caution (as we explain below). Gender is measured with a dummy variable equal to 1 if the
respondent was male and 0 if female. Age is measured continuously.
Estimation
Our dependent variables are ordered and hence we estimate ordered probit models with
robust standard errors. No sampling weights were provided with the surveys as they were
designed to be a nationally representative sample. We report results in table 3.
The models generally show some support for our economic hypothesis (H1) and much
more support for the role of parties (H2, H3). Education rarely has any significant effect on
21
The only other vote choice question in the survey was for 1998, when the PAC did not yet exist and hence we
cannot use this earlier vote choice data.
26
attitudes toward CAFTA, but income tends to have some positive effect. Higher levels of income
were generally associated with more positive attitudes towards CAFTA-DR.
Since ordered probit models do not readily allow for substantive interpretation directly
from slope coefficients, we calculate changes in predicted probabilities for our key variables
holding other variables constant and using the Clarify procedure (King et al., 2000) to construct
confidence intervals. Figure 2 displays the change in predicted probability of being in each
category of our four dependent variables when income level is changed from low to high. We see
that the change in probability is increasing across the categories. The probability of being in a
pro(anti)-CAFTA category increases (decreases) when income is changed from the low to high
category, but this change is modest. In contrast, our party measures fare better across each survey
question. We see considerable differences between pro and anti CAFTA-DR parties. Those
individuals that voted for a pro-CAFTA-DR party in 2006 had a significantly more favorable
opinion of the agreement. Controlling for economic factors that could influence opinions about
CAFTA-DR, respondent preferences over CAFTA-DR were split along party lines. In particular,
using an individual’s previous vote for PAC as our excluded category, we observe a positive and
highly significant coefficient on our PLN vote variable. Those voting with the PLN were much
more likely to favor CAFTA. Figure displays substantive effects as before by changing party
Presidential vote from the PAC to the PLN. We find significant, positive and sizeable effects.
Party affiliation is a strong predictor of preferences over CAFTA.22 Compared to the influence of
22
Interestingly our Gender variable had a positive and significant coefficient in many of our estimated models.
Males were much more likely to favor CAFTA-DR, and see positive consequences for their families, than were
females. We note that this is a common finding in public opinion research on trade policy in developed countries
(Hiscox and Burgoon, 2006). While the role of gender is not a main feature of our analysis, we note that this further
calls into doubt explanations that suggest differential access across the sexes to formal economics education has an
influence on trade preferences. In supplementary regressions run on sub-samples of the population, the strongest
effect of the Gender variable was amongst those that had completed primary education but had not completed
secondary education.
27
educational and income variables, the influence of party was quite high, though it is obviously
difficult to compare effects across these variables.
Unfortunately these results cannot necessarily be taken as direct evidence that parties
played a causal role. First, the 2006 election had CAFTA-DR as a major issue, and hence we do
not know the extent to which a particular individual decided their 2006 vote choice based on
CAFTA-DR. If our economic and demographic controls do not account for the propensity to
which CAFTA-DR drove vote decisions in 2006, then our estimate for the influence of the PLN
and PAC will be biased. Second, the differences between the PLN and PAC could reflect the
actual overall influence of the PLN and PAC in motivating citizens towards their issue positions,
with each party working in an opposite direction. It could, however, reflect a variety of other
factors.23
Did the PLN have a larger effect on preferences compared to the PAC?24 Answering this
question poses an even more severe identification problem than the joint influence of the two
parties. To try to understand this, we estimated models where we use as the omitted category
those persons that did not for a Presidential candidate in 2006 and included dummy variables for
our other parties (models 5 and 6). Interpreting the coefficients on the dummy variables as
though they are the effect of a particular party requires a range of assumptions that we discuss
below.
23
For instance, while we control for economic and demographic variables—variables that we associate with
‘bottom-up’ sources of preferences—there could be unobserved variables that explain both party vote decisions and
preferences over CAFTA-DR. Or, individuals might moderate their referendum beliefs to match the policy positions
of their preferred parties. This might arise due to reasons completely independent of the actual activities of parties
and instead simply because of conformist attitudes of individuals within a party. Our data does not allow us to rule
these and other possibilities out. Our goal in stating these issues is to try to be transparent about the limitations of
our survey data.
24
In a follow up survey in October respondents were asked whether Solis (the PAC leader) or Arias (the President,
PLN) had influenced their referendum choice. Of those answering the question 59% said Arias had influenced their
vote while 47% said Solis had.
28
Our findings appear more mixed when considering the relative influence of the PLN
versus the PAC. When the excluded category was the NoVote category, the coefficient on the
PAC variable was negative while the coefficient on the PLN was positive. Both were significant.
The absolute magnitude of the coefficients was quite close, but substantive effects calculations
suggest similar influence for the FavorOppose question but a slightly larger effect of the PLN for
the PositiveNegativeBalance question.
We present these results with caution because it could be that, a priori, those that did not
cast a vote for either of the parties were more similar to either PLN or PAC voters. Hence the
coefficient on the party which represents voters who are relatively similar to those who did not
vote would be biased downwards. While we control for several economic and demographic
characteristics, we cannot definitively say that our estimated PLN and PAC coefficients
represent a clean identification of the differential impact of the two parties compared to a third
group ‘uninfluenced’ by the parties.25 Identifying the effect of parties strictly from observational
survey data remains difficult, and the extent to which one believes our results turns on the types
of assumptions one is willing to accept.
Discussion
Our analysis of the Universidad surveys suggests that bottom up and top down factors
may affect individual preferences for CAFTA. But we find stronger support for top down factors
related to parties. The data suggest that there is a positive relationship between capital
endowments and support for CAFTA-DR; high skill individuals support CAFTA more. This
relationship is strongest when people were asked to speculate on how the treaty would affect
25
Furthermore, an assumption in this type of model is that the joint effect of the two parties is additively separable.
This would not hold if, for example, there were any substitution effects from their efforts of parties, for instance if
the effort of the PLN to influence voter x precluded the PAC from reaching the voter. Given the opposing
preferences of the parties, though, we can rule out complementary effects.
29
their family’s livelihoods. Hence the prediction made from a straightforward application of
Heckscher-Ohlin models that low skill individuals should support CAFTA more are not
supported. Instead, we find the opposite result, which is consistent with our analysis in the
previous section and those found by others (Beaulieu et al., 2005). However, controlling for
these economic factors, the role of political parties appears to be very salient in all of our models.
Of course, while we have shown correlations between party support and CAFTA-DR
preferences, we do not test any particular mechanism through which political parties themselves
had an effect. Unfortunately the available survey data makes it very difficult to identify such
mechanisms, like those elaborated above, and differentiate them from other social and economic
forces that may confound the identification of party effects. We are not alone in facing this type
of identification problem (e.g., see (Markowski and Tucker, 2005, pg. 422)) and hence cannot
make clear causal claims based on this data.26
VI: Canton Level Referendum
While qualitative and public opinion polls are important pieces of evidence, we also
collected the referendum results for each of the 81 Costa Rican cantons. For each canton we
calculated the percentage of all votes cast that were in favor of CAFTA-DR (perc_yes). This
forms our dependent variable for this section.27 We link these referendum results to data
collected from the 2000 Costa Rican census and electoral data from the 2002 and 2006
26
The surveys also asked what sources were influential in shaping their positions. Media sources, such as television
debates, tended to have the highest saliency. Political parties, and particular political actors, tended to have less
saliency. However, major participants in the televised debates were political actors with party affiliations, and
television programming included messages transmitted by parties. So parties still could have played a role through
other venues. Indeed, the PLN was quite active in disseminating their message through various media outlets.
27
The results of the referendum were determined by the overall country level vote, not through some form of
‘winner takes all’ system at the canton level. However, we do not measure referendum returns in absolute terms for
several reasons. First, we seek to identify the relationship between referendum voting and party returns in elections
that took place separate from the referendum. Because turnout in each poll could be different, taking the percentage
of a poll is a straightforward way to measure the relative intensity of preferences across separate polls. Second, other
analyses of referendum voting typically utilize vote percentages (Markowski and Tucker, 2005).
30
legislative elections (obtained from the Costa Rican electoral commission, http://www.tse.go.cr/)
to see how vote returns at the canton level correlate with canton political and demographic
characteristics.
Canton level legislative election data lets us measure the relative support for the different
Costa Rican political parties. While legislators are not elected at the canton level, we use canton
level data because this is the lowest level of aggregation for the referendum results. Furthermore,
there is evidence that parties operate with canton-level differences in mind (Booth, 2007, pg.
321). We do not use Presidential returns from 2006 because canton level data from the 1998
Presidential elections was not available to us, where as legislative election returns from both
2002 and 2006 was available.
We measure canton economic characteristics in two ways. Our first way exploits the
industry level employment data reported by the Costa Rican Census. Our goal is to map canton
level occupational data onto a proxy measure for skill levels. Given that there are more industrial
categories than cantons, we needed to collapse this information into a useful index. To do this,
we draw on the work of Ganzeboom, de Graaf, and Treiman to classify particular industries onto
an ‘International Social Economic Index’ (ISEI) (Ganzeboom et al., 1992). “We conceive of the
ISEI as measuring the attributes of occupations that convert a person’s education into income”
(212). The Costa Rican Census provided information on the number of workers across a range of
four digit occupational codes, and then scored each occupational category according to the ISEI,
with higher scores having higher socio-economic status. Next, we calculated the mean and
standard deviation of ISEI score across all industries for the entire country. Next, we calculated
the percentage of workers in each canton that fell into one of three categories of occupations.
“Low” ISEI occupations were those below the mean minus one standard deviation. “Middle”
31
ISEI occupations were those within +/- one standard deviation around the mean. Finally, “High”
ISEI occupations are those above the mean plus one standard deviation. In our regression model
we only enter one of these variables, the low category (LowSocEcon%). The ISEI measure is our
main economic independent variable; it measures the skill level of each canton.
As an alternative measure of canton level factor endowments, we measured the
percentage of residents that had ended their education at the primary (primaryschool), secondary
(secondschool), and university (universityeduc) levels. In practice we found very high
correlations between our skill proxy and our education variables, giving us more confidence in
the validity of our skill proxy (e.g., the correlation between LowSocEcon% and primaryschool
was r=.73).28
Analysis & Results
Table 4 presents a series of OLS models regressing a canton’s % of referendum vote that
was pro-CAFTA on several different sets of economic and political variables.
Economic Variables
Our results for the referendum are consistent with the individual level surveys. Economic
factors (bottom up preferences) have some influence on the vote for CAFTA, but top down party
influences are also strong. Cantons with a high percentage of workers in industries with low
levels of the ISEI measure—districts with many workers in low skill industries—are
significantly less likely to vote in favor of CAFTA-DR. When we use our alternative educationbased measures, we obtain similar results. Cantons with a higher percentage of residents that had
28
We include a canton level measure of the percent of the workforce that was unemployed as a control variable.
32
ended their education at the primary level were less supportive of CAFTA-DR. Conversely,
those with higher levels of secondary or university educated persons were more supportive.29
Political Variables
Do canton level political variables explain additional variation in the referendum returns
once we control for economic preferences? Are political parties able to mobilize support towards
or away from what economic preferences might suggest? Answering these questions is of course
methodologically difficult so we use multiple methods to present results, turning simple
regression models to alternative procedures below.
Using 2006 electoral data several of our party variables are highly significant (models
m2006). The sum of electoral returns to the pro-CAFTA parties (PLN, PUSC, and Libertarian
parties) was a positive and highly significant predictor. Cantons with higher percentages of votes
going to one of the pro-CAFTA-DR parties were more likely to vote in favor of CAFTA-DR.
Examining parties individually, we found a positive and significant coefficient for the PLN, a
negative and significant coefficient for the PAC in one model, and insignificant coefficients for
other parties. A dominating issue of the 2006 election was CAFTA-DR. Hence it is not
surprising that when we regress the perc_yes variable on 2006 electoral return data, we get
significant coefficients on our party variables.
As noted, we collected electoral return data for the 2002 and 2006 legislative elections.
As can be seen, party measures from 2002 (models m2002) were poor predictors of the
referendum results—they were never significant—whereas for 2006 they did quite well.
Changing the electoral variables from 2002 measures to 2006 measures decreased the Baysian
Information Criterion score by 6-10 points in each model, indicating significantly better model
29
Interestingly, the model with our ISEI measure had significantly lower Bayesian Information Criterion scores than
the models with education measures. Our more detailed data on socio-economic status provides a significantly better
fit to the data than do pure education measures.
33
fit. This difference in results using 2002 and 2006 electoral data is very interesting and suggests
that political parties may have played an important role in driving referendum returns.30 The key
question is what role. Were parties chasing after votes that had already been decided on
economic grounds, and/or were parties able to move individuals to the party’s position by
convincing undecided voters/voters unaware of their economic preferences or by moving voters
away from their economic positions?
Additional Analysis of the Role of Political Parties
The preceding analysis establishes correlations between party vote shares and canton
level referendum returns. But this does not necessarily establish that parties played any causal
role. For example, there could be some other variable that led both to observed party vote shares
and referendum results. Can we identify a causal effect played by political parties? To begin to
answer this question we conducted a series of exercises to explore the link between party
strength and CAFTA vote share: was the PLN able to get higher referendum percentages for
CAFTA in cantons where they also scored large improvements in their vote share from 2002 to
2006?31
30
In 2002 CAFTA wasn't on the national agenda. Parties had yet to 'signal' to their members how they should feel
about CAFTA. By 2006 they had signaled voters. This potentially suggests that parties were operating between 2002
and 2006, and afterwards, to compel voting on CAFTA.
31
Before detailing our measurement strategy we first discuss an important issue dealing with the changing partisan
landscape in Costa Rica that could bias our analyses. The decline of the PUSC between 1998 and 2006 may have led
those with pro-CAFTA-DR preferences to simply migrate to the PLN. Hence if we see a relationship between the
PLN’s improvement in vote share and voting on CAFTA-DR this may still be solely a function of economic
preferences. There are several reasons to think that this is not the case. First, the Universidad public opinion polls
used above asked respondents who they sympathized with in the 1998 Presidential election. Of the 286 persons
saying they sympathized with the PUSC in 1998, 69 voted for the PLN Presidential candidate in 2006 and 96 voted
for the PAC candidate. Hence more PUSC supporters switched to the PAC than switched to the PLN. Second, in
January, prior to the election, three former PUSC party leaders defected to the PAC, whose leaders hoped the move
would help garner the leftist party votes from the PUSC (Murillo, 2006a). Similarly, Wilson argues that the PUSC
encouraged voters to vote for the PAC candidate in the Presidential election and the PUSC candidates in the
legislative elections (Wilson, 2007). Finally, we found no significant correlations between our changes in PUSC
vote share (discussed below) and changes in PLN vote share. Hence despite the similarities between the PLN and
the PUSC there appeared to be little systematic movement of voters from the PUSC to the PLN.
34
We take change in canton vote share to be indicative of the PLN’s dedication of
resources in order to improve their electoral prospects. Hence, ceteris paribus, cantons with large
increases in PLN vote share were also more likely to receive party cues and framing. To measure
vote change in each canton, we calculated the (Vote%06-Vote%02)/ Vote%02 for each party or
collection of parties (depending on expressed CAFTA preferences) for the legislative election
returns (we did not use the Presidential election returns from 2006). This reduces to
Vote%06/Vote%02-1. Negative numbers mean a party lost vote share and positive numbers
mean a party gained vote share.32 The last two columns of table 4 present the results of
regressing our perc_yes variable onto to these electoral change variables (models Chng). We see
that the coefficients on the change in PLN vote share (PLN-Change) and the coefficient on the
change in vote share to the pro-CAFTA parties (PLN, PUSC, Libertarian) were both positive and
highly significant. Coefficients on other parties were insignificant. Cantons where the PLN saw
strong gains (in 2006 as a percentage of their 2002 returns) were more likely to have more proCAFTA voting in 2007, controlling for their economic characteristics. Cantons that saw strong
changes in PAC vote shares did not.
This relationship may have been, however, not because of anything the PLN did but only
because of existing economic preferences in the cantons about CAFTA-DR. Did the PLN gain
votes in the urban areas which on economic grounds were more likely to vote for CAFTA-DR?
Or did they score large changes in rural areas or areas with a higher percentage of workers in low
socio-economic status occupations? Our analysis indicates that the PLN’s vote share gains were
If we used the straight difference in each party’s vote share—not measured as a percentage of the 2002 vote—we
obtain similar results except that the Libertarian party coefficient become slightly significant in our regression
analysis. Using the straight difference between vote share generally produced higher estimates for the influence of
the PLN in both the regression and matching analyses below. Hence, whether one believes the more appropriate
measure is change in vote share as a percentage of previous vote share or the straight difference, we report the more
conservative empirical estimate.
32
35
predominantly in areas with low percentages of workers in low socio-economic occupations.
Generally speaking their electoral gains were more clustered in urban area and less so in rural
areas, especially when estimated as a percentage of their 2002 vote. This thus makes estimating
the independent effect of the PLN quite difficult. And while we “control” for what we believe to
be a good measure of canton level economic preferences, our results may be due to omitted
variables or arise from the particular parametric assumptions we employ in our estimation.
Furthermore, we cannot observe a series of counterfactuals that would help us identify the role of
parties. For example, would a district with low socio-economic status have changed its CAFTADR vote if the PLN had put in more organizational effort—or had been more successful in their
efforts due to particular strategies orthogonal to strict economic preferences?
Thus it is difficult to know whether the PLN was able to influence voters or whether
voters were simply responding to their economic interests. To help address—though by no
means solve—these problems, we turn to a different empirical framework.
Matching
In this section our goal is to examine whether parties make a difference in CAFTA
voting. Were party elites able to shift voters to greater support for CAFTA? We do this by
comparing in a way that makes very few parametric assumptions and avoids extrapolation,
districts which were economically similar but either increased their PLN vote share a lot or a
little. We want to compare two populations of cases that had similar economic characteristics,
but different levels of change in party vote share. Here we conceptualize changes in vote share as
the treatment variable. Intentional efforts by parties, here the more resource rich PLN, may have
a causal effect on voting if top-down influences are salient. Hence if we think about change in
36
party vote share as our treatment variable (Ti =1: large increase and Ti =0: small increase), we
want the distribution of the economic variable, Xi, to be approximately the same across the
treatment and control groups.33
We don’t observe the counterfactual outcome of what a treated canton would have done
in the referendum had it not been treated, and vice versa. That is, we do not observe all of the
potential outcomes. However, if the condition above holds in the observational data—known as
exogeneity—then the assignment of treatment was conducted independent of the potential
outcomes (here, vote returns either under the treatment or not). If this obtains, then for a given
value of our economic measure LowSocEcon%34 (or two values sufficiently close by) we can
take the difference in the CAFTA-DR vote between cantons with substantively different levels of
change in PLN vote share and more reasonably identify the causal effects of the PLN. Of course,
this exogeneity condition is unlikely to hold and indeed does not in our raw data (see below).
We split our sample into two groups. The first group, our treatment group, saw electoral
gains for the PLN above the median of the population of cantons, whereas the second, control
group, saw electoral gains below the median. Here we use our PLN-Change variable, which is
the PLN’s 2002 minus 2006 vote share as a percentage of the 2002 vote share.35
In order to establish similarities in distributions of the economic variable across treatment
and control, we must also consider the supports of the distribution.36 Hence a second way to
focus the analysis is to exclude cantons with extreme values of the covariate where there were
either only treated groups or only control groups. For instance, at the low extreme of
33
I.e., F(Xi| Ti =1)F(Xi| Ti =0) where F represents some density function over values of our economic variable X.
All of our results below become stronger if we use educational measures as proxies for economic interests. Hence
our estimates are more conservative than what they would be if we used educational measures.
35
Alternative methods of dichotomization, such as splitting at the mean, produce nearly identical results. Although it
is possible to consider continuous treatment regimes, this adds significant complexity to the analysis (Imai and
vanDyk, 2004).
36
E.g., F1 and F2 might have very similar shapes, but F1 has a significantly larger range than does F2. Formally, we
can write this as 0<Pr(Ti =1| Xi =x)<1 for all x, which is known as the ‘overlap’ or ‘common support’ assumption.
34
37
LowSocEcon% there might not be any observations that increase their PLN vote share by an
amount above the median. Hence, if we are interested in the effect of the treatment we cannot
reasonably incorporate such observations to make the counterfactual claim of how they would
have voted had they also seen an increase in PLN vote share. Such extrapolation, possible in
regression analysis, can be misleading. In our analysis we employ both matching and restriction
to a common support.
Before proceeding we must be clear that insofar as our economic variable may not
capture all economic preferences; it is possible that we have omitted variable bias which
matching will do nothing to correct (Ho et al., 2007, pg. 206). In order to obtain accurately
measured quantities it must be the case that, conditioning on a set of observable pre-treatment
covariates, the values of the outcome variables are independent of the treatment assignment rule.
In our case, we cannot be sure that our economic variable is perfectly measured or there isn’t
some other variable correlated with the mis-measured portion of the economic variable that
correlates with the political data. Below we conduct formal sensitivity analysis that considers this
possibility. However, we note that our economic measure of skill levels was generated using
disaggregated Census data which then was used to construct an economic index of skill using
established procedures. More importantly, political parties used Census data in order to plan their
electoral strategies.37 Hence we use a data source that was used by the agents we study in order
to match. While we cannot be sure of exactly what data they used, or how they used it, we are
certainly closer to establishing no omitted variable bias (ignorability) than were we to use data
that parties did not use.38 We can be more confident that, having conditioned on data that parties
In preparation for the 2006 election representatives from the PLN indicated that over a year’s worth of censuses
and assessment had resulted in these strategic plans (Rojas, 12/19/2005).
38
In medical studies matching is done on the characteristics that doctors used in deciding whether or not to assign
someone to a treatment. Thus, given the information of the decision-makers, matching is done in a way that parallels
37
38
used in determining their electoral strategies, the treatment assignment is independent of the
potential outcome (referendum %).
We utilize propensity score matching to estimate the average treatment effect on the
CAFTA-DR vote due to the political efforts of the PLN party. The first step is to estimate the
propensity scores for each canton. The propensity score is defined as the conditional probability
of receiving the treatment given the pre-treatment covariate39, or this is an estimate of the
probability that a canton recorded an above the median change in PLN vote share as a function
of the canton’s economic characteristics, here the LowSocEcon% variable. IF SUCCESFUL, it
can be shown that treatment assignment is conditionally independent of potential outcomes given
the propensity score. Next, we match cantons that had the most similar propensity score and
were also on the common support. 4041
Our key result is that, having matched based on our economic variable, support for
CAFTA rises substantially when comparing cantons with small changes in PLN vote shares to
ones having large changes. We calculate the average treatment effect (ATE), which is the mean
difference between the matched pairs in the treatment and control group. We estimate the ATE to
be .053 (.01,.09) using replacement and .062 (.024,.101) without replacement, where we
bootstrap our standard errors to estimate the 95% confidence intervals. Based on these estimates,
treatment assignment. We note that we generally found stronger results if we used our estimates of the tariff effects
of CAFTA-DR on cantons, which were highly correlated with our economic measures. However, parties surely did
not have such information available, and hence we conduct a more conservative analysis.
39
Formally π(Xi)= Φ(Ti =1|Xi), where Φ is a probit link function (normal c.d.f.).
40
Alternative approaches, such as using the Mahalanobis distance function produce nearly identical results (which is
not surprising given that we are matching on a single covariate).
41
Prior to matching, the set of cantons with below median PLN vote share change had an average LowSocEcon%
value of .11 and those in the treatment group had an average of .26—a clear difference between the two groups (t=5.85). After matching and selection on the common support, we achieve considerably more balance, with the
respective control and treatment means of .119 and .121 (t=-.68). However, the assumption that after matching the
covariates are approximately equal in distribution across treatment and control groups is not completely checked by
comparing a single moment, the mean, though this is the typical diagnostic in the literature. Following (Ho et al.,
2007), we plot the quartile-quartile (QQ) plot for the distribution of LowSocEcon% in the treatment and control
groups and present these results in our supplementary materials. Our procedure produces quite similar distributions.
39
the average effect of a canton shifting from a low level of electoral change to a high level of
electoral change is about a 5-6% change in support for CAFTA-DR.42 Only making
comparisons between cantons with similar economic characteristics, cantons where the PLN
made greater gains it was most able to convince voters to support CAFTA.
In the preceding discussion we noted that it could be the case that there is an omitted
variable, such that our propensity score matching procedure fails. We assume that in our matched
pairs each would have been equally likely to receive the treatment.43 We argued that our socioeconomic variable provides data that parties used in their campaign strategies for the 2006
election, but cannot of course rule out that there were other variables that we have omitted.
Formal sensitivity analyses to see how much of an omitted variable problem one would need in
order to change our conclusions suggest that our results are relatively robust. 44
Our data thus provide a cumulative set of results that support hypotheses 2 and 3a and b.
Controlling for economic factors that affect preferences, we find large differences in individual
support for CAFTA depending on their identification with pro- or anti-CAFTA parties, and we
find that identification with the PLN had the largest effect on public opinion. Furthermore, when
42
We note that matching analysis using our calculations of the effects changes in tariffs on cantons generated a
higher estimated impact of the PLN—9%, as did using educational achievement proxies for canton skill level.
Hence given the available data we report a more conservative estimate. We also conducted our matching analysis
where we dichotomized on the straight difference between 2002 and 2006 vote shares, instead of this difference as a
percentage of the 2002 vote share. Without replacement we estimate the ATE to be .07 (.03,.11) with associated
=2.25 (see below), with replacement we estimate the ATE to be .03 (-.002,.075).
43
However, it could be the case that Pr(T i =1|Xi =xk)≠ Pr(Ti =1|Xi =xj) for some j=k. This lack of equality may be
due to our unobserved covariate u, such that if measured it we’d obtain Pr(T i =1|Xi =xk, Ui=uk )= Pr(Ti =1|Xi =xj,
Ui=uj).
44
To address this problem of failing to control for some relevant covariate in our matching procedure, we utilize
formal sensitivity analysis as outlined by Rosenbaum (Rosenbaum, 2004). What is the magnitude of hidden bias—
bias generating differences in the probability of receiving the treatment after matching is done on observed
covariates—above which our results would no longer be statistically significant? Our calculations indicate that in
our matching with without replacement the treatment group would need to be =2.15 times as likely to receive the
treatment in order for the upper bound of the significance level to exceed .05. Hence our results seem fairly robust.
As a point of reference, the  found in many other social science studies is often around 1.4, whereas for the
relationship between smoking and cancer the estimated  is around 6 (conversation with Kosuke Imai). Estimates
for with replacement put =1.7, however the calculation procedure assumes 1x1 matching.
40
using matching to control for similarities across cantons, we find that those cantons that had the
biggest increases in support for the PLN from 2002 to 2006 produced the biggest majorities in
favor of CAFTA in 2007. Districts where the PLN was best organized and most successful
electorally were the ones where it could convert potential anti-CAFT voters into pro-CAFTA
ones. Party strength then may be related to its capacity to sway voters. What our results show is
that through numerous different empirical data and strategies, politics and parties mattered
greatly for the passage of CAFTA in Costa Rica. The PLN was able to convert voters who might
not have supported CAFTA for economic reasons into supporters and thus was able to (barely)
ratify the agreement.
VI. Conclusion
The CAFTA referendum in Costa Rica was a major political event. And it was the first
such public vote on a trade agreement in a developing country. It thus provides a new look at the
politics of international trade in the developing world. We examine the central theories that have
been used to explore public preferences toward trade. These theories often rely on economic
models that assume that individuals calculate their gains and losses from a policy of
liberalization and then vote these economic preferences. We examine this “bottom up” process of
preference formation in Costa Rica , finding little support for the standard Stolper-Samuelson
model that developing countries abundant in unskilled labor are more favorable toward trade
(Dutt and Mitra, 2006; Mayda and Rodrik, 2005). Instead, we find that support for CAFTA-DR
was strongest among individuals with higher levels of human capital, and in cantons with greater
concentrations of high skilled workers. In part our results arise because CAFTA did not cut trade
barriers equally across all sectors, but rather reduced them most on sectors of the economy
employing unskilled labor. As other research has found, trade liberalization has tended to benefit
41
skilled workers more than unskilled ones in developing countries due largely to skill-biased
technological change and the importation of capital for high skill production (Acemoglu, 2003;
Goldberg and Pavcnik, 2007; Robbins and Gindling, 1999). Our research supports this finding
about the contrary effects of trade in developing countries and suggests that workers with
different skill levels understand to some extent the potential effects of trade liberalization. Our
research then differs from numerous studies which find that bottom up preferences play a
substantial role in public attitudes toward trade (Scheve and Slaughter, 2001).
In contrast, we provide some evidence that politics and parties can make a difference. As
others have emphasized in very different contexts, elites can use various strategies involving
both communication and organizational resources to persuade voters to adopt positions that
might be at odds with their economic interests (Baker, 2008; Gabel and Scheve, 2007; Ray,
2003). Such elite or top down preference formation processes have been less studied in the
political economy of trade. Indeed to find such effects in the area of international trade may be a
hard case for top down models since economic effects are most often found to be highly salient
here. While there are difficult methodological problems associated with showing causality, we
have used a variety of data sources (individual opinion and canton level voting) and empirical
methods to bolster confidence in our results. We think that the association between vote gains for
the most pro CAFTA party (PLN) between 2002 and 2006 and the vote for CAFTA in 2007
strongly suggests that where parties are well organized they can use their rhetorical and other
resources to alter or clarify individual’s views of their policy preferences. Among parties that are
not strongly organized or in regions where parties lack strong organization, they seem much less
able to convert voters to their positions. Hence while others have stressed the importance of
different characteristics of individuals for their receptiveness to elite communication, we focus
42
on the internal characteristics of the parties themselves to explain the differential success of
parties in converting voters (Baker, 2008; Gabel and Scheve, 2007; Ray, 2003). Whether the
ability of parties to influence voters’ preferences is good for democracy is an important issue
which we cannot address, but one worth considering.
We have certainly not proved that elites can produce a substantial change in public
preferences. We have provided some evidence from various sources that this might have
occurred in this case. Longitudinal data (Gabel and Scheve, 2007) and experimental research
(Tilley and Wlezien, 2008) would help to address the empirical problems we face. Unfortunately
such data is just now beginning to be available for developing countries. But our findings suggest
that democratic politics in developing countries may bear strong resemblances to those in
developed ones.
It is interesting to note that the CAFTA referendum almost failed to pass in Costa Rica.
Since most referenda proposed by governments succeed (Butler and Ranney, 1994, pg. 20), this
near failure is important to understand. We think that the politics of trade liberalization in
developing countries deserves more attention. It turns out that it is not the mirror image of trade
politics in developed countries, as models like Stolper-Samuelson would predict. Indeed the
cleavages look much like those in developed countries with high skill individuals supporting
trade and low skill ones opposing it, as its effects seem to increase the inequalities between these
two groups. These results for the developing world are strikingly different from those we
expected to see (e.g., (Wood, 1994)). As in the developed countries, they do not bode well for
trade liberalization in the developing countries since as voters low skill workers outnumber high
skill ones substantially. Without strong efforts by governments to compensate losers and by
parties to convince voters that openness is good for them, developing countries may also face a
43
political backlash against trade and globalization. The politics of openness in developing country
democracies thus promises to be an interesting and important area of research for the world
economy in coming years.
44
Table 1: Costa Rica’s Top Import Industries from the US, 2005
HS number
85
84
39
48
90
62
27
10
61
38
Description
Electrical machinery and equipment and parts thereof
Machinery and mechanical appliances
Plastics and articles thereof
Paper and paperboard
Optical, measuring, precision instruments and apparatus
Articles of apparel, not knitted or crocheted
Mineral fuels, mineral oils and products of their distillation
Cereals
Articles of apparel, knitted or crocheted
Miscellaneous chemical products
% of total imports
31.4
13.2
8.0
5.3
3.7
3.3
3.2
3.1
2.5
2.0
Average tariff
3.44
1.31
4.42
5.58
1.46
14.88
4.44
11.96
14.75
3.19
Trade-weighted tariff
0.86
0.98
2.27
1.82
0.22
15.00
4.42
9.82
14.99
3.28
CAFTA-DR tariff
2.72
1.10
3.93
2.91
0.39
0.00
1.67
3.85
0.00
2.58
% of total imports
17.4
15.8
10.5
10.1
9.4
4.7
4.7
3.7
Average tariff
1.36
4.67
1.62
12.44
0.93
0.99
15.13
2.67
Trade-weighted tariff
0.02
2.30
0.56
10.16
0.03
0.02
9.23
3.17
CAFTA-DR tariff
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Table 2: Costa Rica’s Top Export Industries to the US, 2005
HS number
90
08
85
62
84
09
61
40
Description
Optical, measuring, precision instruments and apparatus
Edible fruits and nuts
Electrical machinery and equipment and parts thereof
Articles of apparel, not knitted or crocheted
Machinery and mechanical appliances
Coffee, tea, maté and spices
Articles of apparel, knitted or crocheted
Rubber and articles thereof
45
Table 3 FavorOpposeCAFTA & PositiveNegBalanceCAFTA
---------------------------------------------------------------------------------------------------------------------------------------------------------------FavorOp~1
FavorOp~2
FavorOp~3
FavorOp~4
FavorOp~5
FavorOp~6
Positiv~1
Positiv~2
Positiv~3
Positiv~4
Positiv~5
Positiv~6
---------------------------------------------------------------------------------------------------------------------------------------------------------------main
LowMiddleEdu
0.13
0.10
0.13
0.19
0.14
0.19
[0.10]
[0.11]
[0.10]
[0.16]
[0.18]
[0.16]
MiddleEdu
0.16
0.16
0.16
0.21
0.23
0.21
[0.11]
[0.13]
[0.11]
[0.17]
[0.20]
[0.17]
HighEdu
0.11
0.09
0.11
0.08
0.11
0.08
[0.13]
[0.15]
[0.13]
[0.19]
[0.21]
[0.19]
HighIncome
0.39**
0.43**
0.39**
0.36*
0.39*
0.36*
[0.14]
[0.15]
[0.14]
[0.14]
[0.16]
[0.14]
MiddleIncome
-0.05
-0.19
-0.05
0.06
-0.05
0.06
[0.16]
[0.18]
[0.16]
[0.17]
[0.18]
[0.17]
LowMiddleIncome
0.09
0.09
0.09
0.04
0.06
0.04
[0.09]
[0.10]
[0.09]
[0.10]
[0.12]
[0.10]
PLN_PrezVote
0.97**
0.99**
0.45**
0.45**
0.84**
0.86**
0.51**
0.51**
[0.08]
[0.08]
[0.08]
[0.08]
[0.11]
[0.12]
[0.12]
[0.11]
PAC_PrezVote
-0.52**
-0.53**
-0.32*
-0.35**
[0.09]
[0.09]
[0.13]
[0.13]
Libertario_Pre~e
0.71**
0.72**
0.19
0.19
0.73**
0.78**
0.41
0.43
[0.19]
[0.18]
[0.18]
[0.18]
[0.28]
[0.28]
[0.27]
[0.28]
PUSC_PrezVote
0.50**
0.52**
-0.02
-0.02
0.37+
0.43*
0.05
0.07
[0.15]
[0.15]
[0.14]
[0.15]
[0.21]
[0.21]
[0.21]
[0.21]
OtherParty_Pre~e
0.25
0.26
-0.27
-0.28
0.26
0.29
-0.06
-0.07
[0.19]
[0.19]
[0.19]
[0.19]
[0.24]
[0.25]
[0.24]
[0.25]
NoVote_PrezVote
0.52**
0.53**
0.32*
0.35**
[0.09]
[0.09]
[0.13]
[0.13]
PtySuppCAFTA
0.90**
0.92**
0.79**
0.81**
[0.08]
[0.08]
[0.11]
[0.11]
1=Male
0.19**
0.18**
0.15*
0.14*
0.19**
0.18**
0.15+
0.11
0.21*
0.18+
0.15+
0.11
[0.06]
[0.06]
[0.07]
[0.07]
[0.06]
[0.06]
[0.09]
[0.09]
[0.10]
[0.10]
[0.09]
[0.09]
Age
0.01**
0.01**
0.01*
0.01*
0.01**
0.01**
0.01+
0.00
0.01+
0.01
0.01+
0.00
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
---------------------------------------------------------------------------------------------------------------------------------------------------------------cut1
Constant
0.11
-0.00
0.09
-0.01
-0.41**
-0.54**
-0.22
-0.36*
-0.15
-0.27
-0.55*
-0.72**
[0.16]
[0.11]
[0.18]
[0.13]
[0.15]
[0.11]
[0.22]
[0.16]
[0.26]
[0.18]
[0.22]
[0.15]
---------------------------------------------------------------------------------------------------------------------------------------------------------------cut2
Constant
0.69**
0.58**
0.66**
0.56**
0.17
0.05
0.53*
0.39*
0.58*
0.46*
0.21
0.04
[0.16]
[0.11]
[0.18]
[0.13]
[0.15]
[0.11]
[0.23]
[0.16]
[0.27]
[0.19]
[0.22]
[0.15]
---------------------------------------------------------------------------------------------------------------------------------------------------------------cut3
Constant
1.13**
1.02**
1.07**
0.98**
0.61**
0.49**
0.84**
0.71**
0.89**
0.77**
0.52*
0.35*
[0.16]
[0.12]
[0.19]
[0.13]
[0.15]
[0.11]
[0.23]
[0.16]
[0.27]
[0.19]
[0.22]
[0.15]
---------------------------------------------------------------------------------------------------------------------------------------------------------------cut4
Constant
1.94**
1.84**
1.90**
1.81**
1.42**
1.30**
1.79**
1.67**
1.83**
1.72**
1.47**
1.31**
[0.17]
[0.12]
[0.19]
[0.14]
[0.15]
[0.11]
[0.24]
[0.17]
[0.28]
[0.20]
[0.23]
[0.15]
---------------------------------------------------------------------------------------------------------------------------------------------------------------Observations
1253
1254
954
954
1253
1254
600
601
449
449
600
601
---------------------------------------------------------------------------------------------------------------------------------------------------------------Standard errors in brackets
+ p<0.10, * p<0.05, ** p<0.01
46
Figure 1
20
06
20
04
20
02
20
00
19
98
19
96
19
94
0
.2
.4
.6
.8
1
Changing Costa Rican Exports to US
Year
Primary
Labor
Technology
Figure 2
Effect of Income on DR-CAFTA Preferences
.1
0
-.1
-.2
-.2
-.1
0
.1
.2
PositiveNegBalanceCAFTA
.2
FavorOpposeCAFTA
0
1
2
Category
3
4
0
1
2
Category
3
4
3
4
Y-axis represents change in predicted probability of being in category if moving from low to high income
Gender held at male and other variables held at median
PLN vs PAC Cleavage on DR-CAFTA Preferences
.2
0
-.2
-.4
-.4
-.2
0
.2
.4
PositiveNegBalanceCAFTA
.4
FavorOpposeCAFTA
0
1
2
Category
3
4
0
1
2
Category
Y-axis represents change in predicted probability of being in category if moving from PAC to PLN
Gender held at male and other variables held at median
47
Table 4: % of Referendum Votes Pro-CAFTA, Canton level
---------------------------------------------------------------------------------------------------------------------------------------------------------------m2006_1
m2006_2
m2006_3
m2006_4
m2006_5
m2006_6
m2006_7
m2002_1
m2002_2
m2002_3
Chng1
Chng2
---------------------------------------------------------------------------------------------------------------------------------------------------------------universityeduc
0.75**
[0.19]
secondschool
0.58**
[0.17]
primaryschool
-0.42**
[0.13]
LowSocEcon%
-0.38**
-0.34**
-0.36**
-0.39**
-0.34**
-0.33**
-0.34**
-0.22**
-0.29**
[0.06]
[0.07]
[0.06]
[0.06]
[0.09]
[0.08]
[0.08]
[0.07]
[0.07]
ProCAFTAParty%06
0.34**
0.35**
0.30*
0.29**
0.32**
[0.12]
[0.13]
[0.12]
[0.09]
[0.10]
%PAC06
-0.19
-0.28+
[0.22]
[0.17]
%PLN06
0.29*
0.23+
[0.14]
[0.13]
%Libert06
0.30
[0.24]
%PUSC06
0.04
[0.20]
ProCAFTAParty%02
-0.05
[0.13]
%PAC02
-0.24
-0.25
[0.19]
[0.18]
%PLN02
-0.24
-0.25
[0.18]
[0.16]
%Libert02
0.04
[0.28]
%PUSC02
0.02
[0.19]
PLN-Change
0.14**
[0.04]
PUSC-Change
0.05
[0.06]
LIB-Change
0.01
[0.01]
PAC-Change
-0.02
[0.02]
ProCAFTAPtyCha~e
0.41**
[0.08]
AntiCAFTAPtyCh~e
-0.01
[0.02]
%Unempl
0.01
0.00
0.00
-0.00
-0.00
-0.00
-0.00
0.01
0.00
0.00
0.01
0.00
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.00]
[0.01]
[0.01]
[0.01]
[0.00]
[0.00]
%Urban
0.03
-0.00
[0.03]
[0.03]
Constant
0.22**
0.19*
0.53**
0.41**
0.37**
0.48**
0.57**
0.57**
0.66**
0.68**
0.50**
0.61**
[0.08]
[0.09]
[0.06]
[0.05]
[0.06]
[0.12]
[0.08]
[0.08]
[0.12]
[0.08]
[0.06]
[0.03]
---------------------------------------------------------------------------------------------------------------------------------------------------------------Observations
81
81
81
81
81
81
81
81
81
81
81
81
R-squared
0.201
0.177
0.153
0.379
0.385
0.398
0.380
0.307
0.334
0.333
0.445
0.478
BIC
-163.19
-160.86
-158.45
-183.62
-179.99
-173.02
-179.38
-170.36
-164.75
-173.51
-179.57
-193.38
---------------------------------------------------------------------------------------------------------------------------------------------------------------Robust standard errors in brackets
+ p<0.10, * p<0.05, ** p<0.01
48
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