Daniel Kono - Compensating for the Climate: Unemployment Insurance and Climate Change Votes

Global climate change is a pressing political issue, yet we do not know why some governments adopt more ambitious carbon restrictions than others. Building on the “compensation hypothesis” from the international trade literature, I argue that politicians are more willing to support carbon restrictions when workers in their districts are protected by generous unemployment insurance. I test this hypothesis with an analysis of Congressional climate change votes. I find that higher carbon-intensive employment makes legislators less likely to vote for carbon restrictions, but this effect is weaker where unemployment benefits are high. I also find that generous unemployment benefits make legislators more likely to vote for carbon restrictions, and this effect is stronger where carbon-intensive employment is high. My results imply that generous unemployment insurance can help governments pass stronger climate change legislation. They also indicate that the compensation hypothesis has important applications outside its traditional domain.