Heterogeneous firm-level responses to trade liberalization: A test using stock price reactions

Holger Breinlich

Journal of International Economics, 2014, vol. 93, issue 2, 270-285

Abstract: This paper presents novel empirical evidence on key predictions of heterogeneous firm models by examining stock market reactions to the Canada–United States Free Trade Agreement of 1989 (CUSFTA). I derive testable predictions for a class of models based on Melitz (2003). Using the uncertainty surrounding CUSFTA's ratification, I show that the pattern of abnormal returns of Canadian manufacturing firms was strongly consistent with predictions related to export (U.S.) tariff reductions, but less so with predictions related to import (Canadian) tariff reductions. Lower Canadian tariffs did have an effect through the implied reduction in intermediate input tariffs, however.

Keywords: Heterogeneous firm models; Stock market event studies; Canada–U.S. Free Trade Agreement (search for similar items in EconPapers)
JEL-codes: F12 F14 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (26)

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Related works:
Working Paper: Heterogeneous Firm-Level Responses to Trade Liberalisation: A Test Using Stock Price Reactions (2011)
Working Paper: Heterogeneous Firm-Level Responses to Trade Liberalization: A Test Using Stock Price Reactions (2011)
Working Paper: Heterogeneous firm-level responses to trade liberalisation: a test using stock price reactions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:93:y:2014:i:2:p:270-285

DOI: 10.1016/j.jinteco.2014.04.002

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