The Impact of NAFTA on US Local Labor Market Employment

Abstract

I study the impact of the North American Free Trade Agreement on US local employment based on regional variation in exposure to US and Mexico’s tariff liberalization. Lower US tariffs led to a relative decline in the share of the working-age population employed in manufacturing (especially among low-skilled workers) in more exposed regions and increases in unemployment and in the share of the population employed in certain low-pay nonmanufacturing industries. Employment losses due to US tariff liberalization were much larger among female and nonwhite workers. Mexico’s tariff cuts, in contrast, increased manufacturing employment among individuals with college education.