Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions
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 surrou...
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| Format: | Article |
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Elsevier
2014
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| Online Access: | https://eprints.nottingham.ac.uk/30236/ |
| _version_ | 1848793947834417152 |
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| author | Breinlich, Holger |
| author_facet | Breinlich, Holger |
| author_sort | Breinlich, Holger |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | 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. |
| first_indexed | 2025-11-14T19:08:24Z |
| format | Article |
| id | nottingham-30236 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:08:24Z |
| publishDate | 2014 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-302362020-05-04T20:13:51Z https://eprints.nottingham.ac.uk/30236/ Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions Breinlich, Holger 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. Elsevier 2014-07 Article PeerReviewed Breinlich, Holger (2014) Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions. Journal of International Economics, 93 (2). pp. 270-285. ISSN 0022-1996 Heterogeneous firm models; Stock market event studies; Canada–U.S. Free Trade Agreement http://www.sciencedirect.com/science/article/pii/S002219961400052X doi:10.1016/j.jinteco.2014.04.002 doi:10.1016/j.jinteco.2014.04.002 |
| spellingShingle | Heterogeneous firm models; Stock market event studies; Canada–U.S. Free Trade Agreement Breinlich, Holger Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| title | Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| title_full | Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| title_fullStr | Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| title_full_unstemmed | Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| title_short | Heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| title_sort | heterogeneous firm-level responses to trade liberalization: a test using stock price reactions |
| topic | Heterogeneous firm models; Stock market event studies; Canada–U.S. Free Trade Agreement |
| url | https://eprints.nottingham.ac.uk/30236/ https://eprints.nottingham.ac.uk/30236/ https://eprints.nottingham.ac.uk/30236/ |