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Identifying the effects of NAFTA on the U.S. economy between 1992 and 1998: a decomposition analysis

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  • Dixon, Peter
  • Rimmer, Maureen

Abstract

Trade policies often get a bad rap. It is often difficult to pinpoint the causes of poor economic outcomes and trade policies become a convenient scapegoat. In a much quoted article, Kehoe (2005) criticizes CGE modelers for underestimating the trade-stimulating effects of NAFTA. His evidence is that in the 10 years following the signing of NAFTA, trade volumes for the NAFTA countries grew more quickly than was shown ex ante in the CGE results. However, properly interpreted the CGE results were not about how fast trade would grow in these 10 years. Rather they were about how NAFTA would affect growth in trade. Put another way, the CGE modelers were making projections of how much trade growth should be attributed to NAFTA. In this paper, we address the attribution issue. Using a detailed CGE model, we decompose movements in U.S. macro and industry variables from 1992 to 1998 into the contributions of NAFTA factors and other factors.

Suggested Citation

  • Dixon, Peter & Rimmer, Maureen, 2015. "Identifying the effects of NAFTA on the U.S. economy between 1992 and 1998: a decomposition analysis," Conference papers 332660, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332660
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    References listed on IDEAS

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    1. Peter B. Dixon & Jayant Menon & Maureen T. Rimmer, 2000. "Changes in Technology and Preferences: A General Equilibrium Explanation of Rapid Growth in Trade," Australian Economic Papers, Wiley Blackwell, vol. 39(1), pages 33-55, March.
    2. Peter B. Dixon & Maureen T. Rimmer, 2004. "The US Economy from 1992 to 1998: Results from a Detailed CGE Model," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 13-23, September.
    3. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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