The economics and politics of revoking NAFTA

Andrei Levchenko, Raphael Auer and Barthélémy Bonadio

No 13393, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Nafta; Quantitative trade models; Distributional effects; Protectionism; Trade policy (search for similar items in EconPapers)
JEL-codes: F11 F13 F16 F62 J62 R13 (search for similar items in EconPapers)
Date: 2018-12
New Economics Papers: this item is included in nep-int and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: The Economics and Politics of Revoking NAFTA (2020)
Working Paper: The Economics and Politics of Revoking NAFTA (2018)
Working Paper: The Economics and Politics of Revoking NAFTA (2018)
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