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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. Ce mémoire enquête sur les effets de productivité de l'Accord de libre échange Canada‐USA dans le secteur manufacturier canadien. Il appert que les réductions de tarifs douaniers canadiens ont accru les taux d'évacuation des installations modérément productives qui n'exportaient pas. Voilà qui a entraîné une réallocation des parts de marché vers les installations hautement productives, ce qui explique les gains de productivité observés quand les tarifs douaniers ont été réduits. Les réductions de tarifs américains ont entraîné des gains de productivité intra‐installations dans les entreprises exportatrices, et ce particulièrement pour les entreprises nouvellement entrées dans le marché des exportations. Tout manque à s'ajuster à l'Accord par une recalibration de la production et par une réduction de la main d'oeuvre s'est concentré dans les installations qui n'exportaient pas, alors que les entreprises exportatrices ont capturé les gains de l'Accord.

Suggested Citation

  • Alla Lileeva, 2008. "Trade liberalization and productivity dynamics: evidence from Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(2), pages 360-390, May.
  • Handle: RePEc:wly:canjec:v:41:y:2008:i:2:p:360-390
    DOI: 10.1111/j.1540-5982.2008.00467.x
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    References listed on IDEAS

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    2. Piera Bello & Vincenzo Galasso, 2020. "Old before their time: the role of employers in retirement decisions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1198-1223, October.
    3. Hsieh, Chang-Tai & Li, Nicholas & Ossa, Ralph & Yang, Mu-Jeung, 2020. "Accounting for the new gains from trade liberalization," Journal of International Economics, Elsevier, vol. 127(C).
    4. Loretta Fung & Jen Baggs & Eugene Beaulieu, 2011. "Plant Scale and Exchange‐Rate‐Induced Productivity Growth," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 1197-1230, December.
    5. Kishi, Keiichi & Okada, Keisuke, 2021. "The impact of trade liberalization on productivity distribution under the presence of technology diffusion and innovation," Journal of International Economics, Elsevier, vol. 128(C).

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