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Firm survival and exit in response to trade liberalization

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  • Jen Baggs

Abstract

. This paper considers the implications of changing trade barriers for the survival of Canadian manufacturing firms. The findings suggest that Canadian tariff reductions decreased the probability of survival for Canadian firms while declines in American tariffs increased that probability. Combining these effects, two‐thirds of Canadian manufacturing firms saw their probability of survival increase as a result of the tariff reductions mandated by the Canada‐US Free Trade Agreement. However, the vulnerability of a firm to failure as a result of trade liberalization was mitigated by the characteristics of that firm, particularly scale and leverage. JEL classification: F1, L1 Survie des entreprises et disparition en réaction à la libéralisation du commerce. Ce mémoire examine les impacts de changements dans les barrières tarifaires sur la survie des entreprises manufacturières canadiennes. Les résultats suggèrent que la réduction des droits de douane canadiens réduit la probabilité de survie des entreprises canadiennes alors qu’une réduction des droits de douane américains a l’effet contraire. La combinaison de ces deux effets engendrés par les réductions tarifaires simultanées commandées par l’Accord de libre échange Canada‐USA a fait que les 2/3 des entreprises manufacturières canadiennes ont vu leur probabilité de survie s’accroître. Cependant la vulnérabilité de l’entreprise à la faillite à cause de la libéralisation du commerce est différente selon les caractéristiques de l’entreprise, et en particulier sa taille et sa capitalisation.

Suggested Citation

  • Jen Baggs, 2005. "Firm survival and exit in response to trade liberalization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1364-1383, November.
    • Handle: RePEc:wly:canjec:v:38:y:2005:i:4:p:1364-1383
    DOI: 10.1111/j.0008-4085.2005.00328.x
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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