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Do tariff reductions affect the wages of workers in protected industries? Evidence from the Canada-U.S. Free Trade Agreement

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  • James Townsend

Abstract

In this paper, I use Canadian micro-data on individual workers to investigate the effect on wages of the tariff reductions mandated by the Canada-U.S. Free Trade Agreement (CUSFTA). The literature on industry wage premia has revealed that the industry of employment is an important determinant of a worker's wage. My findings indicate that relative wages fell in those industries that faced the deepest tariff cuts. This effect was experienced regardless of whether or not workers belonged to a union, suggesting that CUSFTA reduced the returns to industry-specific human capital for those workers in the mostly heavily affected industries.

Suggested Citation

  • James Townsend, 2007. "Do tariff reductions affect the wages of workers in protected industries? Evidence from the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 69-92, February.
  • Handle: RePEc:cje:issued:v:40:y:2007:i:1:p:69-92
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    Citations

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    Cited by:

    1. S├ębastien Breau & David L. Rigby, 2010. "International trade and wage inequality in Canada," Journal of Economic Geography, Oxford University Press, vol. 10(1), pages 55-86, January.
    2. Moritz Ritter, 2015. "Trade and inequality in a directed search model with firm and worker heterogeneity," Canadian Journal of Economics, Canadian Economics Association, vol. 48(5), pages 1902-1916, December.
    3. Alexander Murray, 2017. "The Effect of Import Competition on Employment in Canada: Evidence from the 'China Shock'," CSLS Research Reports 2017-03, Centre for the Study of Living Standards.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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