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Essays on trade liberalization and labour market outcomes Townsend, James Herbert

Abstract

This thesis uses a comprehensive data set to examine the relationship between Canadian labour market outcomes and several changes in the policy environment. The data set, spanning the period 1981-98, is compiled from a number of comparable surveys and contains information on the demographics and job characteristics of individual workers. The first chapter examines the impact that the tariff reductions of the Canada- U.S. Free Trade Agreement (CUSFTA) had on the inter-industry wage structure in the goods producing sector. Previous studies use industry-level data and consequently are unable to control for either differences in worker composition or divergent wage trends for different worker types. These studies find that tariff cuts either had no effect or increased the relative wages of workers in impacted sectors. In contrast, I use data with information on worker characteristics and find that the relative wages of non-union workers in impacted industries decreased. The second chapter investigates the link between the CUSFTA tariff reductions and several labour market outcomes that are potentially linked to industrial productivity. In particular, I examine whether tariff reductions are related to changes in the (i) the size of firm a worker is likely to be employed with, (ii) the probability that a worker will be represented by a union, and (iii) the mean skill level of workers. Although I find evidence that these outcomes have changed over time, none of them seem to be linked directly to CUSFTA. The final chapter, co-authored with David Green, examines the extent to which the declining market outcomes of successive cohorts of job entrants in Canada can be accounted for by changes in the minimum wage, unionization rate, and industrial composition of employment. A flexible density estimator is used, which allows for a comparison between cohorts across the entire wage distribution. The main findings are that for males, changes in unionization and industrial composition can account for about a quarter of the decline in wage outcomes for new job entrants between 1998 and 1981. Similar results are found for females; in addition, the minimum wage provides a "wall" against further erosion for more recent cohorts of entrants.

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