Death of Canadian Manufacturing Plants: Heterogeneous Responses to Changes in Tariffs and Real Exchange Rates
AbstractWe examine the simultaneous effects of real-exchange-rate movements and of tariff reductions on plant death in Canadian manufacturing industries between 1979 and 1996. We find that both currency appreciation and tariff cuts increase the probability of plant death, but that tariff reductions have a much greater effect. Consistent with the implications of recent international-trade models involving heterogeneous firms, we further find that the effect of exchange-rate movements and tariff cuts on exit are heterogeneous across plants - particularly pronounced among least efficient plants. Our results reveal multi-dimensional heterogeneity that current models featuring one-dimensional heterogeneity (efficiency differences among plants) cannot fully explain. There are significant and substantial differences between exporters and non-exporters, and between domestic- and foreign- controlled plants. Exporters and foreign-owned plants have much lower failure rates; however, their survival is more sensitive to changes in tariffs and real exchange rates, whether differences in their efficiency levels are controlled or not.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Statistics Canada, Analytical Studies Branch in its series Economic Analysis (EA) Research Paper Series with number 2010061e.
Date of creation: 14 Apr 2010
Date of revision:
Manufacturing; Business performance and ownership; Business adaptation and adjustment; Entry; exit; mergers and growth;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-BEC-2010-04-24 (Business Economics)
- NEP-EFF-2010-04-24 (Efficiency & Productivity)
- NEP-ENT-2010-04-24 (Entrepreneurship)
- NEP-INT-2010-04-24 (International Trade)
- NEP-OPM-2010-04-24 (Open Economy Macroeconomic)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Norback, Pehr-Johan & Tekin-Koru, Ayca & Waldkirch, Andreas, 2013. "Multinational Firms and Plant Divestiture," MPRA Paper 45957, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Brown).
If references are entirely missing, you can add them using this form.