Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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Impact of Trade on Canada’s Employment, Skill and Wage Structure

Ram C Acharya, Ryan Kelly

Last modified: 2012-06-25


Using newly constructed data for 88 Canadian industries (including primary, manufacturing and services), for 15 years (1992-2007), we analyze the impact of trade and technological change on labour demand, skill structure, wage premiums and welfare in Canada. Results show that export growth has no impact whereas import growth reduces employment growth. But contrary to popular belief, Canada’s job loss due to imports has been very small, only about 6000 persons annually. Out of the five major trading partners, the negative impact is associated with import growth from the US, China, and Mexico, and not from EU and Japan. Mexico’s and China’s negative impacts are more pronounced in low ICT and low R&D intensive industries, respectively. In terms of employment growth, ICT is skill-neutral, whereas R&D and real exchange rate appreciation are biased toward high skill workers. By source country, imports from the US and China are skill-neutral, whereas imports from Mexico increase the employment share of high skill workers. Neither export nor import growth has impact on wage rate. However, import growth lowered the wage premium of medium- and high-skilled workers compared to low skilled workers. Considering all effects of trade, the upper bound annual net benefit of trade is about 2.5 percent of GDP. (JOL: F1, I20, J21, O33).