Effects of North American free trade agreement on the US labor market: An ARDL bounds testing approach

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.