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The economics and politics of revoking NAFTA

Author

Listed:
  • Levchenko, Andrei
  • Auer, Raphael
  • Bonadio, Barthelemey
Abstract
We provide a quantitative assessment of both the aggregate and the distributional effects of revoking NAFTA, using a multi-country, multi-sector, multi-factor model of world production and trade with global input-output linkages. Revoking NAFTA would reduce US welfare by about 0.2%, and Canadian and Mexican welfare by about 2%. The distributional impacts of revoking NAFTA across workers in different sectors are an order of magnitude larger in all three countries, ranging from -2.7 to 2.26% in the United States. We combine the quantitative results with information on the geographic distribution of sectoral employment, and compute average real wage changes in each US congressional district, Mexican state, and Canadian province. We then examine the political correlates of the economic effects. Congressional district-level real wage changes are negatively correlated with the Trump vote share in 2016: districts that voted more for Trump would on average experience greater real wage reductions if NAFTA is revoked.

Suggested Citation

  • Levchenko, Andrei & Auer, Raphael & Bonadio, Barthelemey, 2018. "The economics and politics of revoking NAFTA," CEPR Discussion Papers 13393, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13393
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    Cited by:

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    5. Davide Furceri & Swarnali A Hannan & Jonathan D Ostry & Andrew K Rose, 2022. "The Macroeconomy After Tariffs," The World Bank Economic Review, World Bank, vol. 36(2), pages 361-381.
    6. Khan, Nazmus Sadat, 2020. "Revisiting the effects of NAFTA," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 1-16.
    7. Sanyal, Anirban, 2023. "Caught in the Crossfire: How Trade Policy Uncertainty Impacts Global Trade," EconStor Preprints 272825, ZBW - Leibniz Information Centre for Economics.
    8. Pablo D Fajgelbaum & Pinelopi K Goldberg & Patrick J Kennedy & Amit K Khandelwal, 2020. "The Return to Protectionism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 1-55.
    9. Sebastián Bustos & Jose Morales‐Arilla, 2024. "Gains from globalization and economic nationalism: AMLO versus NAFTA in the 2006 Mexican elections," Economics and Politics, Wiley Blackwell, vol. 36(1), pages 202-244, March.
    10. Sanyal, Anirban, 2021. "Impact of US-China Trade War on Indian External Trade," EconStor Preprints 242250, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    Nafta; Quantitative trade models; Distributional effects; Protectionism; Trade policy;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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