The Effect of the Canada-US Free Trade Agreement on Canadian Trade Policy
(with Joseph Mai)
Canadian Journal of Economics , forthcoming.
Abstract: In this paper we show that the Canada-US Free Trade Agreement (CUSFTA) tariff preferences have triggered a decline in Canadian external tariffs, explaining a two percentage point reduction in the average tariff between 1989 and 1998. Next, we found that industries which generate the least export rent to the US firms experienced deeper tariff cuts in Canada; this result provides evidence of cooperation in trade policies between the US and Canada. Finally, we estimate the effect of the CUSFTA on the intensity of industrial lobbying for trade policy in Canada and find no relationship between preferential trade liberalization and lobbying activity.
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The Distribution of the Gains from Spillovers through Worker Mobility between Workers and Firms
(with Nikolay Zubanov)
European Economic Review , 70, 2014, pp. 17-35
Abstract: Knowledge spillovers through worker mobility between firms, found in previous research, imply that knowledge production within firms creates a positive externality to the hiring firms and their workers. We calculate the shares in the gains from spillovers retained by these parties using matched employer-employee data from Danish manufacturing. We find that around two-thirds of the total output gain (0.1% per year) is netted by the firms as extra profit, about a quarter goes to the incumbent workers as extra wages, while the workers who bring spillovers receive no more than 8% of it. This gains distribution, which favors the hiring firms, is similar for different types of moving workers, and is stable over time.
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Tariff Evasion and Rules of Origin Violations under the Canada-US Free Trade Agreement
Canadian Journal of Economics , 45(3), 2012, pp. 879-902
Abstract: Using product-level data on trade between Canada and the U.S., this paper presents evidence of tariff evasion and violation of the rules of origin occurring under the Canada-U.S. Free Trade Agreement (CUSFTA). It shows that more imports go unreported at the destination country when tariffs are higher. Consistent with the tariff evasion hypothesis, this result implies that the trade creation effect of a free trade agreement may in fact be due to less underreporting. Further, this paper shows that the larger Canadian tariff preference margin for the U.S. is associated with more goods originating in third countries being transshipped through the U.S. territory for re-export. The preference margin is also positively correlated with the value of excess imports from the U.S., which qualify for preferential treatment. Both results suggest the presence of persistent violations of CUSFTA's rules of origin.
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Productivity Spillovers Across Firms through Worker Mobility
(with Nikolay Zubanov)
American Economic Journal: Applied Economics , 4(2), 2012, pp. 168-198
Abstract: Using matched firm-worker data from Danish manufacturing, we observe firm-to-firm worker movements and find that firms that hired workers from more productive firms experience productivity gains one year after the hiring. The productivity gains associated with hiring from more productive firms are equivalent to 0.35 percent per year for an average firm. Surviving a variety of statistical controls, these gains increase with education, tenure, and skill level of new hires, persist for several years after the hiring was done, and remain broadly similar for different industries and measures of productivity. Competing explanations for these gains, knowledge spillovers in particular, are discussed.
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Trade Policy of a Free Trade Agreement in the Presence of Foreign Lobbying
Journal of International Economics , 77(1), 2009, pp. 37-49
Abstract: This paper studies the effect of foreign lobbies on trade policy of a country which is a member of a Free Trade Agreement (FTA). It uses a monopolistically competitive political economy model in which the government determines external tariffs endogenously. The effect of foreign lobbying under the FTA is examined empirically using Canadian industry-level trade data that allow differentiating of lobby groups by the country of origin. The analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy. The heterogeneity of foreign lobbies is also important: the presence of an organized lobbying group in an FTA partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the FTA is associated with less protection.
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