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NAFTA and its Impact on Mexico

  • Aghion, Edouard

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36529.

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Date of creation: 12 Dec 2011
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Handle: RePEc:pra:mprapa:36529
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  1. Nora Lustig, 2001. "Life Is Not Easy: Mexico's Quest for Stability and Growth," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 85-106, Winter.
  2. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
  3. Amaranta Melchor del Río & Susanne Thorwarth, 2006. "Tomatoes or Tomato Pickers? - Free Trade and Migration in the NAFTA Case," Working Papers 0429, University of Heidelberg, Department of Economics, revised Dec 2006.
  4. Kyoji Fukao & Toshihiro Okubo & Robert M Stern, 2002. "An Econometric Analysis of Trade Diversion under NAFTA," Working Papers 491, Research Seminar in International Economics, University of Michigan.
  5. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Bar-Ilan University, Department of Economics.
  6. James R. Markusen & Stephen Zahniser, 1997. "Liberalization and Incentives for Labor Migration: Theory with Applications to NAFTA," NBER Working Papers 6232, National Bureau of Economic Research, Inc.
  7. Anne O. Krueger, 1999. "Trade Creation and Trade Diversion Under NAFTA," NBER Working Papers 7429, National Bureau of Economic Research, Inc.
  8. Louise Cord & Quentin Wodon, 2001. "Do Agricultural Programs in Mexico Alleviate Poverty? Evidence from the Ejido Sector," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 239-256.
  9. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
  10. Aaron Tornell & Gerardo Esquivel, 1995. "The Political Economy of Mexico's Entry to NAFTA," NBER Working Papers 5322, National Bureau of Economic Research, Inc.
  11. Javier Santiso, 2007. "Latin America's Political Economy of the Possible: Beyond Good Revolutionaries and Free-Marketeers," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262693593, June.
  12. repec:idb:brikps:77778 is not listed on IDEAS
  13. Aaron Tornell & Frank Westermann & Lorenza Martínez, 2004. "NAFTA and Mexico's Economic Performance," CESifo Working Paper Series 1155, CESifo Group Munich.
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