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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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    JEL classification:

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

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