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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.

Suggested Citation

  • Jen Baggs, 2005. "Firm survival and exit in response to trade liberalization," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1364-1383, November.
  • Handle: RePEc:cje:issued:v:38:y:2005:i:4:p:1364-1383
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    References listed on IDEAS

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    1. Galor, Oded & Tsiddon, Daniel, 1997. "Technological Progress, Mobility, and Economic Growth," American Economic Review, American Economic Association, vol. 87(3), pages 363-382, June.
    2. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    3. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    4. Freeman, Scott, 1996. "Equilibrium Income Inequality among Identical Agents," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1047-1064, October.
    5. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, January.
    6. Bandyopadhyay, Debasis & Basu, Parantap, 2001. "Redistributive Tax and Growth in a Model with Discrete Occupational Choice," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 111-132, June.
    7. Amparo Castello & Rafael Domenech, 2002. "Human Capital Inequality and Economic Growth: Some New Evidence," Economic Journal, Royal Economic Society, vol. 112(478), pages 187-200, March.
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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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