Effects of North American Free Trade Agreement on the US Labor Market: An ARDL Bounds Testing Approach

Authors: 
Mustafa Ozturk, Osman Nuri Aras
DOI Number: 
http://doi.org/10.31039/jomeino.2020.4.1.6
Abstract: 
One of the political debates on negative effects of the economic integration between the USA and the other members of the North American Free Trade Agreement (NAFTA) Canada and Mexico is the rise of unemployment. This study aims to identify whether this thesis is true or not. For that the relations between the statistical variables employment, export, import, wages and gross domestic product were estimated through Autoregressive Distributive Lag model (ARDL). Empirical findings show that the import from the NAFTA countries has negative effect on the employment in the long run while its effect on the employment is positive in the short run. However, both the short run and the long run effects are so small that the negative effect is negligible comparing to the benefits of the economic integration.
Keywords: 
North America Free Trade Agreement (NAFTA), employment, trade, Autoregressive Distributive Lag model (ARDL).
Full Text: 
File download
References: 

Autor, D. H., Dorn, D., & Hanson, G. H. (2016). The China shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics, 8, 205-240 https://doi.org/10.1146/annurev-economics-080315-015041
Burfisher, M. E., Robinson, S., & Thierfelder, K. (2001). The impact of NAFTA on the United States. Journal of Economic perspectives, 15(1), 125-144. https://doi.org/10.1257/jep.15.1.125
De La Cruz, J., & Riker, D. (2014). The impact of NAFTA on US labor markets. Office of Economics Working Paper No. 2014-06A, US International Trade Commission. https://www.usitc.gov/publications/332/ec201406a.pdf
Dziczek, K., Swiecki, B., Chen, Y., Brugeman, V., Schultz, M., & Andrea, D. (2017). NAFTA briefing: Trade benefits to the automotive industry and potential consequences of withdrawal from the agreement. Center for Automotive Research, Ann Arbor, MI. https://www.usitc.gov/publications/332/ec201406a.pdf
Eduardo, J., Cota, M. (2016). US manufacturing imports from China and employment in the Mexican manufacturing sector. Cuadernos de Economía, 35(69), 583-613. http://www.redalyc.org/pdf/2821/282144830002.pdf
Mendoza Cota, J. E. (2016). US manufacturing imports from China and employment in the Mexican manufacturing sector. Cuadernos de Economía, 35(69), 583-613.
Guillot, C. (2018, January 30). Manufacturers Consider the Impacts of NAFTA Negotiations, Chief Executive. https://chiefexecutive.net/manufacturers-consider-impacts-nafta-negotiat...
[email protected]. (2016). NAFTA’s impact on the U.S. economy: What are the fcts?. [email protected]. Wharton University of Pennsylvania. http://knowledge.wharton.upenn.edu/article/naftas-impact-u-s-economy-facts/
Andrew Chatzky, A., McBride, J., & Sergie, M. A. (2018). NAFTA and the USMCA: Weighing the Impact of North American Trade. Council on Foreign Relations, 24. https://www.cfr.org/backgrounder/naftas-economic-impact
O’Leary, C. J., R. W. Eberts and B. M. Pittelko (2012), “Effects of NAFTA on US Employment and Policy Responses”, OECD Trade Policy Working Papers, No. 131, OECD Publishing.
O’Leary, C. J., Eberts, R. W., & Pittelko, B. M. (2012). Effects of NAFTA on US employment and policy responses: a product of the international collaborative initiative on trade and employment (ICITE). OECD Trade Policy Papers, No. 131, OECD Publishing. https://doi.org/10.1787/5k9ffbqlvk0r-en
OECD.Stat. (2019) https://stats.oecd.org/
Pesaran, M. H., Shin, Y., & Smith, R. J. (2000). Structural analysis of vector error correction models with exogenous I(1) variables. Journal of Econometrics, 97(2), 293-343. https://doi.org/10.1016/S0304-4076(99)00073-1
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
U.S. Census Bureau. (2019a). Trade in goods with Mexico. https://www.census.gov/foreign-trade/balance/c2010.html
U.S. Census Bureau. (2019b). Trade in Goods with Canada. https://www.census.gov/foreign-trade/balance/c1220.html
US Department of Labor, Bureau of Labor Statistics. (2019) https://www.bls.gov/

Page: 
100-113.
Content Status: 
Published