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The Long-Run Labour Market Effects of the Canada-U.S. Free Trade Agreement

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  • Brian K Kovak
  • Peter M Morrow

Abstract

This article assesses the long-run effects of the 1989 Canada-U.S. Free Trade Agreement on the Canadian labour market using matched longitudinal administrative data for the years 1984–2004. We simultaneously examine the labour market effects of increased export expansion and import competition, generally finding adverse effects of Canadian tariff cuts and favourable effects of U.S. cuts, though both effects are small. Workers initially employed in industries that experienced larger Canadian tariff concessions exhibit a heightened probability of layoffs at large firms, but little impact on long-run cumulative earnings. Lower earnings and years worked at the initial employer are offset by gains in other manufacturing industries, construction, and services. Canadian workers quickly transitioned out of industries facing import competition, with the bilateral nature of the FTA providing import-competing workers employment options in alternative manufacturing industries benefiting from larger U.S. tariff cuts.

Suggested Citation

  • Brian K Kovak & Peter M Morrow, 2025. "The Long-Run Labour Market Effects of the Canada-U.S. Free Trade Agreement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(6), pages 4026-4058.
    • Handle: RePEc:oup:restud:v:92:y:2025:i:6:p:4026-4058.
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    File URL: http://hdl.handle.net/10.1093/restud/rdae113
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    Citations

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    Cited by:

    1. Justin R. Pierce & Peter K. Schott & Cristina Tello-Trillo, 2022. "Trade Liberalization and Labor-Market Outcomes: Evidence from US Matched Employer-Employee Data," Working Papers 22-42, Center for Economic Studies, U.S. Census Bureau.
    2. repec:aep:anales:4551 is not listed on IDEAS
    3. César, Andrés & Ciaschi, Matías & Falcone, Guillermo & Neidhöfer, Guido, 2023. "Trade shocks and social mobility: The intergenerational effect of import competition in Brazil," ZEW Discussion Papers 23-042, ZEW - Leibniz Centre for European Economic Research.
    4. David Autor & David Dorn & Gordon Hanson & Maggie R. Jones & Bradley Setzler, 2024. "Places versus People: The Ins and Outs of Labor Market Adjustment to Globalization," Working Papers 24-78, Center for Economic Studies, U.S. Census Bureau.
    5. Hayakawa, Kazunobu & Sudsawasd, Sasatra, 2025. "Impacts of trade diversion from China in the United States market on wages in a third country: Evidence from Thailand," International Economics, Elsevier, vol. 183(C).

    More about this item

    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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