The impact of NAFTA on prices and competition: Evidence from Mexican manufacturing plants

Felipe Brugués, Ayumu Ken Kikkawa, Yuan Mei and Pablo Robles

Journal of International Economics, 2025, vol. 155, issue C

Abstract: This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ output prices and markups. We distinguish between Mexican goods that are exported and those sold domestically, and decompose their prices separately into markups and marginal costs. We then analyze how these components were affected by the reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs on Mexican exports. We find that domestically sold products saw a decline in prices as Mexican plants faced more competition and gained access to cheaper inputs. Prices of exported goods fell only slightly as plants increased their markups in response to a favorable competitive environment due to declines in U.S. tariffs.

Keywords: Markup estimation; Multi-product plants; Trade liberalization; FTAs; Pro- and Anti- competitive effects (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:155:y:2025:i:c:s0022199625000418

DOI: 10.1016/j.jinteco.2025.104085

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