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Geographic Market Access and the Effects of Trade on Length of Production Run, Product Diversity and Plant Scale of Canadian Manufacturing Plants, 1974 to 1999

Author

Listed:
  • Baldwin, John R.
  • Brown, W. Mark
  • Gu, Wulong

Abstract

Over the past three decades, tariff barriers have fallen significantly, leading to an increasing integration of Canadian manufactures into world markets and especially the U.S. market. Much attention has been paid to the effects of this shift at the national scale, while little attention has been given to whether these effects vary across regions. In a country that spans a continent, there is ample reason to believe that the effects of trade will vary across regions. In particular, location has a significant effect on the size of markets available to firms, and this may impact the extent to which firms reorganize their production in response to falling trade barriers. Utilizing a longitudinal microdata file of manufacturing plants (1974 to 1999), this study tests the effect of higher levels of trade across regions on the organization of production within plants. The study finds that higher levels of export intensity (exports as a share of output) across regions are positively associated with longer production runs, larger plants and product specialization within plants. These effects are strongest in Ontario and Quebec, provinces that are best situated with respect to the U.S. market.

Suggested Citation

  • Baldwin, John R. & Brown, W. Mark & Gu, Wulong, 2008. "Geographic Market Access and the Effects of Trade on Length of Production Run, Product Diversity and Plant Scale of Canadian Manufacturing Plants, 1974 to 1999," Economic Analysis (EA) Research Paper Series 2008052e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp5e:2008052e
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    References listed on IDEAS

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    1. Jeffrey I. Bernstein & Richard G. Harris & Andrew Sharpe, 2002. "The Widening Canada-US Productivity Gap in Manufaturing," International Productivity Monitor, Centre for the Study of Living Standards, vol. 5, pages 3-22, Fall.
    2. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
    3. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    4. John Baldwin & Wulong Gu, 2009. "The Impact of Trade on Plant Scale, Production-Run Length and Diversification," NBER Chapters,in: Producer Dynamics: New Evidence from Micro Data, pages 557-592 National Bureau of Economic Research, Inc.
    5. Ottaviano, G.I.P. & Thisse, J.-F., 1999. "Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity," Economics Working Papers eco99/31, European University Institute.
    6. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    7. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    8. John R. Baldwin & Richard E. Caves & Wulong Gu, 2005. "Responses to Trade Liberalization: Changes in Product Diversification in Foreign- and Domestic-Controlled Plants," Chapters,in: Governance, Multinationals and Growth, chapter 10 Edward Elgar Publishing.
    9. Baldwin, John R. & Raffiquzzaman, Mohammed, 1995. "Restructuring in the Canadian Manufacturing Sector from 1970 to 1990: Industry and Regional Dimensions of Job Turnover," Analytical Studies Branch Research Paper Series 1995078e, Statistics Canada, Analytical Studies Branch.
    10. Brown, W. Mark, 2007. "The Ebb and Flow of Comparative Advantage: Trade and the Industrial Specialization of Canadian Manufacturing Regions, 1974 to 1999," Economic Analysis (EA) Research Paper Series 2007044e, Statistics Canada, Analytical Studies Branch.
    11. Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February.
    12. W. Mark Brown & William P. Anderson, 2002. "articles: Spatial markets and the potential for economic integration between Canadian and U.S. regions," Papers in Regional Science, Springer;Regional Science Association International, vol. 81(1), pages 99-120.
    13. Timothy Dunne & J. Bradford Jensen & Mark J. Roberts, 2009. "Producer Dynamics: New Evidence from Micro Data," NBER Books, National Bureau of Economic Research, Inc, number dunn05-1.
    14. Gu, Wulong & Sawchuk, Gary, 2006. "How Are Canadian Regions Adjusting to a Larger and More Integrated North American Market?," Economic Analysis (EA) Research Paper Series 2006039e, Statistics Canada, Analytical Studies Branch.
    15. Baldwin, John R. & Beckstead, Desmond & Caves, Richard, 2002. "Changes in the Diversification of Canadian Manufacturing Firms and Plants (1973-1997): A Move to Specialization," Analytical Studies Branch Research Paper Series 2002179e, Statistics Canada, Analytical Studies Branch.
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    Cited by:

    1. Sébastien Breau & David L. Rigby, 2010. "International trade and wage inequality in Canada," Journal of Economic Geography, Oxford University Press, vol. 10(1), pages 55-86, January.

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    Keywords

    Business adaptation and adjustment; Business performance and ownership; International trade; Manufacturing;

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