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NAFTA and its Impact on Mexico

Author

Listed:
  • Aghion, Edouard

Abstract

The principal objective of a free trade agreement between two or more countries is to increase efficiency. As the well-known Heckscher-Ohlin (1933) theorem suggests, by going from autarky to free trade, the countries involved will tend to specialize in the production of those goods and services that each country has a comparative advantage in, and this will lead to increased efficiency and welfare. This paper analyzes how the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico has created efficiency and welfare in Mexico, as it has been argued that NAFTA has been both advantageous as well as disadvantageous for Mexico. In sum, this paper investigates which particular sectors of Mexico’s economy benefitted from and were injured by NAFTA, while taking into account macroeconomic indicators such as GDP growth, Foreign Direct Investment (FDI) flows, volume of trade, wage inequalities and education, as most studies have found the net economic effects of NAFTA on Mexico to be ambiguous.

Suggested Citation

  • Aghion, Edouard, 2011. "NAFTA and its Impact on Mexico," MPRA Paper 36529, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36529
    as

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    References listed on IDEAS

    as
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F1 - International Economics - - Trade

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