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Productivity and Trade Liberalizations in Canada

Author

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  • Loris Rubini

    (Universidad Catolica de Chile and Universidad Carlos III de Madrid)

Abstract

I study the evolution of productivity in Canada relative to the United States during two trade liberalization episodes: the 1965 Auto Pact and the 1989 Free Trade Agreement. I find that Canada´s productivity grew more than U.S. productivity in the liberalized sector, which is consistent with the idea that openness increases productivity. This study reveals new evidence of productivity during the Auto Pact. Regarding the Free Trade Agreement, existing studies find that manufacturing productivity grew less in Canada than in the United States following the agreement. I argue that this is due to the use of prices that are not comparable across countries. Once these prices are made comparable, my findings are that manufacturing productivity grew more in Canada than in the U.S. The results of this study suggest there are productivity gains associated with trade liberalization, and models of international trade should account for them.

Suggested Citation

  • Loris Rubini, 2015. "Productivity and Trade Liberalizations in Canada," Economics Bulletin, AccessEcon, vol. 35(2), pages 1404-1422.
    • Handle: RePEc:ebl:ecbull:eb-14-00956
    as

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    References listed on IDEAS

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    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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