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Trade Liberalization and Productivity Dynamics: Evidence from Canada

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  • Lileeva, Alla

Abstract

This paper investigates the productivity effects of the Canada-United States Free Trade Agreement (FTA) 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 toward highly productive plants, which helps explain why aggregate productivity gains were observed when Canadian tariffs were reduced. The paper also finds that all of the within-plant productivity gains resulting from the U.S. tariff cuts involved exporters and, especially, new entrants into the export market. It demonstrates that any lack of output responses and labour-shedding as a consequence of the FTA were experienced by Canadian plants who were non-exporters, while exporters captured the gains from the FTA.

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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Economic Analysis (EA) Research Paper Series with number 2008051e.

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Date of creation: 07 May 2008
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Handle: RePEc:stc:stcp5e:2008051e

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Keywords: Business adaptation and adjustment; Business performance and ownership; International trade; Manufacturing;

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References

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Citations

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Cited by:
  1. Lileeva, Alla & Baldwin, John R., 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), Statistics Canada, Direction des etudes analytiques 2008054f, Statistics Canada, Direction des etudes analytiques.
  2. Lileeva, Alla & Baldwin, John R., 2008. "Adapting to Import Competition: Effects of Low-wage Trade on Commodity Mix in Canadian Manufacturing Plants," Economic Analysis (EA) Research Paper Series, Statistics Canada, Analytical Studies Branch 2008054e, Statistics Canada, Analytical Studies Branch.
  3. Segerstrom, Paul & Sugita, Yoichi, 2014. "The Impact of Trade Liberalization on Industrial Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9952, C.E.P.R. Discussion Papers.
  4. Arnold, Jens & Javorcik, Beata S. & Mattoo, Aaditya, 2007. "Does services liberalization benefit manufacturing firms ? Evidence from the Czech Republic," Policy Research Working Paper Series, The World Bank 4109, The World Bank.
  5. 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, Springer, vol. 147(1), pages 131-167, April.
  6. 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, Centre for the Study of Living Standards, vol. 26, pages 86-93, Fall.

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