Estimates of the Trade and Welfare Effects of NAFTA

  title={Estimates of the Trade and Welfare Effects of NAFTA},
  author={Lorenzo Caliendo and F. Parro},
  journal={International Political Economy: Trade Policy eJournal},
We build into a Ricardian model sectoral linkages, trade in intermediate goods, and sectoral heterogeneity in production to quantify the trade and welfare effects from tariff changes. We also propose a new method to estimate sectoral trade elasticities consistent with any trade model that delivers a multiplicative gravity equation. We apply our model and use our estimated elasticities to identify the impact of NAFTA's tariff reductions. We find that Mexico's welfare increases by 1.31%, U.S.'s… Expand
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