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Trade liberalization and productivity dynamics: evidence from Canada

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  • Alla Lileeva

Abstract

The paper investigates the productivity effects of the Canada-U.S. Free Trade Agreement 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 towards highly productive plants, which explains the aggregate productivity gains observed when Canadian tariffs were reduced. The U.S. tariff cuts led to the within-plant productivity gains in exporters and, especially, new entrants into the export market. Any lack of output responses and labour-shedding as a consequence of the FTA was experienced by non-exporting plants, while exporters captured the gains from the FTA.

Suggested Citation

  • Alla Lileeva, 2008. "Trade liberalization and productivity dynamics: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 360-390, May.
  • Handle: RePEc:cje:issued:v:41:y:2008:i:2:p:360-390
    DOI: 10.1111/j.1540-5982.2008.00467.x
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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