Internal Trade Barriers and External Migration: Analyzing the Impact of Trade and Migration Policies on Economic Outcomes in Canada

Abstract

This thesis analyzes policy responses to internal trade frictions and external migration barriers, focusing on their economic effects for firms and individuals. Chapter 2 examines the impact of two Canadian internal trade liberalizations on plant-level productivity, markups, and exports. First, I use a control function approach to estimate plant-level total factor productivity and markups based on Canadian manufacturing data from 2004 to 2012. Then, I employ difference-in-differences methods to assess the impact of the agreements on these outcomes. The results indicate that an agreement among the Western provinces significantly increased the likelihood of interprovincial exports, the share of output sold to other provinces, and total factor productivity, but had no significant impact on markups. Chapter 3 shifts to trade frictions between Canadian provinces, employing a novel method to estimate the variability of these frictions across sectors, industries, and time. The analysis identifies considerable geographic dispersion in trade barriers faced by provinces, particularly when selling goods and services, and evaluates how interprovincial trade agreements influence aggregate trade flows, revealing substantial variation across sectors and manufacturing sub-industries. In Chapter 4 I move from trade policies to the effects of immigration. This chapter explores a historical period of mass migration in Canada, examining the impact of liberalized immigration policies on both native residents and migrants. I find that an increase in immigrant concentration within a census subdivision led to a decrease in the annual earnings of natives. Notably, the settlement patterns of migrants were quite unique: those who settled in Western Canada achieved earnings convergence with natives much more quickly than those in Eastern Canada, likely due to these distinctive settlement dynamics. Overall, this thesis contributes to our understanding of the economic implications of internal trade and migration policies, offering insights for policy decisions related to the efficient allocation and flow of goods, services, and labor within a country.