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Holger Breinlich, Essex Print
Tuesday, 19 May 2009, 14:00 - 15:30

Holger Breinlich, University of Essex

Trade Liberalization and Heterogenous Firm Models: An Evaluation Using the Canada-U.S. Free Trade Agreement

Abstract: We examine the qualitative and quantitative predictions of a heterogeneous firm model à la Melitz (2003) in the context of the Canada - US Free Trade Agreement (CUSFTA) of 1989. For this purpose, we calibrate our model to the pre-trade liberalization stage, simulate the trade liberalization, and compute the resulting growth rates of Canadian industry productivity, exports and imports. We compare them with Trefler's (2004) estimates of the effects of CUSFTA. Our results show that our model performs well in replicating both the qualitative and, to a lesser extent, the quantitative features of Trefler's results. While we underpredict the impact of CUSFTA on growth rates of productivity, we significantly overpredict the increase in Canadian exports and imports.

Location: S 12.227
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