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Do tariff reductions affect the wages of workers in protected industries? Evidence from the Canada‐U.S. Free Trade Agreement

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  • James Townsend

Abstract

. In this paper, I use Canadian micro‐data on individual workers to investigate the effect on wages of the tariff reductions mandated by the Canada‐U.S. Free Trade Agreement (CUSFTA). The literature on industry wage premia has revealed that the industry of employment is an important determinant of a worker's wage. My findings indicate that relative wages fell in those industries that faced the deepest tariff cuts. This effect was experienced regardless of whether or not workers belonged to a union, suggesting that CUSFTA reduced the returns to industry‐specific human capital for those workers in the mostly heavily affected industries. Dans ce texte, l'auteur utilise des micro données canadiennes pour étudier le rapport entre les niveaux de salaires et les réductions de tarifs douaniers engendrées par l'accord de libre échange Canada US. La littérature sur les primes salariales suggère que la structure industrielle de l'emploi est un facteur déterminant dans la détermination des salaires des employés. Les résultats montrent que les salaires relatifs tombent dans les secteurs industriels où les réductions de tarifs sont les plus importantes. Cet impact est enregistré que les employés soient syndiqués ou non. Voilà qui suggère que l'Accord de libre‐échange réduit les rendements sur le capital humain qui est spécifique à une industrie pour les travailleurs des industries les plus fortement affectées.

Suggested Citation

  • James Townsend, 2007. "Do tariff reductions affect the wages of workers in protected industries? Evidence from the Canada‐U.S. Free Trade Agreement," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 69-92, February.
    • Handle: RePEc:wly:canjec:v:40:y:2007:i:1:p:69-92
    DOI: 10.1111/j.1365-2966.2007.00400.x
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    References listed on IDEAS

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    1. Eugene Beaulieu, 2000. "The Canada-U.S. Free Trade Agreement and labour market adjustment in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 540-563, May.
    2. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2005. "Trade, wages, and the political economy of trade protection: evidence from the Colombian trade reforms," Journal of International Economics, Elsevier, vol. 66(1), pages 75-105, May.
    3. Noel Gaston & Daniel Trefler, 1997. "The Labour Market Consequences of the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 18-41, February.
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    5. Surendra Gera & Gilles Grenier, 1994. "Interindustry Wage Differentials and Efficiency Wages: Some Canadian Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 81-100, February.
    6. Peter Kuhn, 1998. "Innis Lecture: Unions and the Economy: What We Know; What We Should Know," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1033-1056, November.
    7. Lawrence F. Katz & Lawrence H. Summers, 1989. "Industry Rents: Evidence and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989 Micr), pages 209-290.
    8. Gaston, Noel & Trefler, Daniel, 1995. "Union wage sensitivity to trade and protection: Theory and evidence," Journal of International Economics, Elsevier, vol. 39(1-2), pages 1-25, August.
    9. Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
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    Cited by:

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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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