Free trade agreements and interregional labor migration: the case of the U.S. and Canada

This paper focuses on the different effects that trade policy have on distinctive regions within a country by modeling the subnational impact of the Free Trade Agreement between the U.S. and Canada using an applied general equilibrium model. This study incorporates interregional labor mobility into the model and, by comparing the new results to those measured in the absence of labor migration, shows the importance of allowing for interregional labor mobility when modeling at the subnational level the effects of nationality of internationally designed policies.A longer version of this paper was presented and received the 8Th Annual Charles M. Tiebout Prize at the Western Regional Science Association Annual Meetings, Tucson, Arizona, February 1994. I would like to thank Geoffrey Hewings, Earl Grinols, Werner Baer, Chris Horak, and three anonymous referees for useful comments. I gratefully acknowledge the support of the Economic Development Administration, U.S. Department of Commerce and the Canadian Embassy in the early stages of this research project. I am solely responsible for any remaining errors in this paper.