Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67818
Authors: 
Keay, Ian
Year of Publication: 
2001
Series/Report no.: 
Queen's Economics Department Working Paper 1002
Abstract: 
During the debate that led up to the implementation of a bilateral free trade agreement between Canada and the U.S. on January 1, 1989, much was made of economists' claims that both nations could expect significant welfare improvements as a result of the removal of tariffs on traded goods. The welfare gains were expected to flow from average cost savings associated with the exploitation of scale economies. In this paper we show that it was overly optimistic to predict substantive reductions in average costs in response to any increases in the scale of production among Canadian or American manufacturing firms. Therefore, ex ante we should have expected trade liberalization between Canada and the U.S. to have had only muted scale, average cost, and welfare effects.
Subjects: 
Economic History
Technology and Scale
Growth and Fluctuations
JEL: 
N12
N62
L61
Document Type: 
Working Paper

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