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Regional Integration and Dynamic Adjustments: Evidence from a Gross National Product Function for Canada and the United States

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  • Chapda Nana, Guy
  • Gervais, Jean-Philippe
  • Larue, Bruno

Abstract

We propose an empirical trade model to test for structural change and dynamic effects induced by free trade agreements for the Canadian and US economies. We estimated a translog Gross National Product (GNP) function along with output and factor shares and tested for structural change (abrupt or gradual) which is endogenously determined by the data. After this, we estimated Stolper-Samuelson (SS) and Rybcynski (R) elasticities, and assessed the stability of their sign and magnitude link to the structural change. The null hypothesis of no structural change is soundly rejected for both countries. For Canada, we found gradual structural change that started prior to the implementation of CUSTA and lasted for several years. In the US case, we found evidence of an abrupt structural change occurring in 1995, a year after NAFTA came into force. More interestingly, several SS and R elasticities experienced sign reversals and a magnification effect over the different sub-periods, implying that the categorization of goods in terms of friends or enemies of labour and capital changed during the transition.

Suggested Citation

  • Chapda Nana, Guy & Gervais, Jean-Philippe & Larue, Bruno, 2010. "Regional Integration and Dynamic Adjustments: Evidence from a Gross National Product Function for Canada and the United States," MPRA Paper 23389, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23389
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    Cited by:

    1. Guy Chapda Nana & Bruno Larue, 2014. "Imposing curvature conditions on flexible functional forms for GNP functions," Empirical Economics, Springer, vol. 47(4), pages 1411-1440, December.
    2. Chapda Nana, Guy & Larue, Bruno, 2012. "Imposing Curvature Conditions on Flexible Functional Forms to GNP Functions," Working Papers 123308, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
    3. Bruno Larue, 2018. "Economic Integration Reconsidered," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(1), pages 5-25, March.

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    More about this item

    Keywords

    GNP function; regional integration; structural change; smooth transition regression; dynamic adjustments.;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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