Working Paper: NBER ID: w29793
Authors: Brian K. Kovak; Peter M. Morrow
Abstract: 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.
Keywords: No keywords provided
JEL Codes: F13; F16; F66; J23; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Canadian tariff cut (N72) | layoff probability increase (J63) |
| U.S. tariff concessions (F13) | layoff probability decrease (J63) |
| Canadian tariff reductions (F13) | negative impacts on employment (F66) |
| gains in other sectors (F69) | mitigation of negative impacts from tariff reductions (F69) |
| CUSFTA (F15) | overall net impact on employment and earnings (F66) |
| layoff probability increase (J63) | transition to other sectors (P23) |
| layoff probability increase (J63) | total years worked decline (J29) |
| layoff probability increase (J63) | cumulative earnings decline (J31) |