In the 1965 Canada-USA auto pact the automotive companies were required to maintain specified levels of assembly activity in Canada. This restriction and subsequent events such as the correlation of a shift in employment to Canada and the widening of pay disparities between American and Canadian workers, the concentration of research in the United States despite Canadian fiscal incentives, and the differences in the 'rescue' packages offered to Chrysler by the two governments, cannot be explained by conventional economic theory. The paper demonstrates that they can be explained as mutually advantageous accommodations to different evaluations of political outputs reflecting endowments and domestic economic interests.

Additional Metadata
Persistent URL dx.doi.org/10.1016/0167-2681(89)90015-2
Journal Journal of Economic Behavior and Organization
Citation
Acheson, K. (1989). Power steering the Canadian automotive industry. The 1965 Canada-USA auto pact and political exchange. Journal of Economic Behavior and Organization, 11(2), 237–251. doi:10.1016/0167-2681(89)90015-2