AN ECONOMETRIC MODEL OF THE CANADIAN CLOTHING AND TEXTILE INDUSTRY

This thesis develops an econometric model of the Canadian clothing and textile industry for the purpose of investigating its structure, the market it faces, linkages between the market and the industry and the sensitivity of the industry to external factors. Using the model, several simulation experiments are conducted with the primary focus centered on the issues of protection accorded the industry. The future prospects of the industry under various alternative scenarios are evaluated.;An ex-ante simulation intended as a reference forecast of the industry suggests that despite the present quota protection, the past downward trend observed in the clothing industry will likely continue in the future, while the textile industry will maintain a status quo. A simulation with a complete removal of tariff protection appears to support the argument that consumer gains will outweigh losses on the labour and production side. Another simulation suggests that there are policy options available that may be considered as effective means of stimulating the industry.;Empirical support is indicated for most of the hypotheses underlying the specification of the model. Some of the hypotheses are: the firms in the industry engage in imperfect competition; the industry operates under constant return to scale; price competitiveness is a significant factor in explaining the level of imports; domestic production capacity has an influence on imports. It is found in the thesis that clothing imports respond with a relatively high elasticity to changes in price as well as income, revealing a source of instability inherent in the clothing industry. As a system, the model is found to trace the history of the industry with reasonable accuracy. The model is also found to display a considerable degree of consistency and stability in its responses throughout the simulation experiments. The thesis thus provides a dynamic, structural and simultaneous economic system that can be validly used either as a forecasting tool or frame of reference in analyses.