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Trade liberalization and productivity dynamics: evidence from Canada

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  • Alla Lileeva

Abstract

The paper investigates the productivity effects of the Canada-U.S. Free Trade Agreement on Canadian manufacturing. It finds that Canadian tariff cuts increased exit rates among moderately productive non-exporting plants. This led to the reallocation of market share towards highly productive plants, which explains the aggregate productivity gains observed when Canadian tariffs were reduced. The U.S. tariff cuts led to the within-plant productivity gains in exporters and, especially, new entrants into the export market. Any lack of output responses and labour-shedding as a consequence of the FTA was experienced by non-exporting plants, while exporters captured the gains from the FTA.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 2 (May)
Pages: 360-390

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Handle: RePEc:cje:issued:v:41:y:2008:i:2:p:360-390

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References

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Citations

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Cited by:
  1. Arnold, Jens & Javorcik, Beata S. & Mattoo, Aaditya, 2007. "Does services liberalization benefit manufacturing firms ? Evidence from the Czech Republic," Policy Research Working Paper Series 4109, The World Bank.
  2. Baldwin, John R. Lileeva, Alla, 2008. "Adaptation a la concurrence des importations : effets du commerce avec les pays a bas salaires sur le portefeuille de produits des etablissements manufacturiers canadiens," Serie de documents de recherche sur l'analyse economique (AE) 2008054f, Statistics Canada, Direction des etudes analytiques.
  3. Don Drummond & Annette Ryan & Michael R. Veall, 2013. "Improving Canada's Productivity Performance: The Potential Contribution of Firm-level Productivity Research," International Productivity Monitor, Centre for the Study of Living Standards, vol. 26, pages 86-93, Fall.
  4. Baldwin, John R. Lileeva, Alla, 2008. "Adapting to Import Competition: Effects of Low-wage Trade on Commodity Mix in Canadian Manufacturing Plants," Economic Analysis (EA) Research Paper Series 2008054e, Statistics Canada, Analytical Studies Branch.
  5. Paul S. Segerstrom & Yoichi Sugita, 2013. "The Impact of Trade Liberalization on Industrial Productivity," CESifo Working Paper Series 4365, CESifo Group Munich.
  6. John Baldwin & Beiling Yan, 2011. "The death of Canadian manufacturing plants: heterogeneous responses to changes in tariffs and real exchange rates," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(1), pages 131-167, April.

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