The impact of tariff liberalisation on Canadian employment, 1987-1996: An empirical investigation of selected manufacturing industries.

Abstract

This paper examines the impact of tariff liberalisation on employment for selected Canadian manufacturing industries between 1987--1996. An input-output model was constructed to estimate the changes in the level of employment arising from changes in the flow of imports and exports due to tariff liberalisation. In addition to an input-output model, preliminary econometric testing was also conducted to capture the effects of other structural and cyclical factors that may have also affected employment during the same period. In this regard, an OLS model was constructed that examined the relationship between employment and the following variables: exchange rates, Canadian gross domestic product, US gross domestic product, and tariff rates. The main finding of the study was that tariff liberalisation had a minimal impact on employment, but that the extent of the impact varied across industries. Moreover, the employment effects were found to be dependent on the specific production requirements of industries rather than trade sensitivity, as is commonly argued in the economic literature. It was also established that, in conjuction with tariff liberalisation, other macro-economic factors also affected the level of employment during the same period.