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


  • Brian K. Kovak
  • Peter M. Morrow


This paper assesses the long-run effects of the 1988 Canada-U.S. Free Trade Agreement (CUSFTA) on the Canadian labor market using matched longitudinal administrative data for the years 1984-2004. We simultaneously examine the labor market effects of increased export expansion and import competition, generally finding adverse effects of Canadian tariff cuts and favorable 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 majority of industry adjustment occurring among new entrants to the labor market.

Suggested Citation

  • Brian K. Kovak & Peter M. Morrow, 2022. "The Long-Run Labor Market Effects of the Canada-U.S. Free Trade Agreement," NBER Working Papers 29793, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:29793
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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. Andrés César & Matías Ciaschi & Guillermo Falcone & Guido Neidhöfer, 2023. "Trade Shocks and Social Mobility: The Intergenerational Effect of Import Competition in Brazil," CEDLAS, Working Papers 0316, CEDLAS, Universidad Nacional de La Plata.
    3. Matías Ciaschi & Andrés César & Guillermo Falcone & Guido Neidhöfer, 2022. "Import competition and social mobility: Evidence from Brazil," Asociación Argentina de Economía Política: Working Papers 4551, Asociación Argentina de Economía Política.

    More about this item

    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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