Trade liberalization, unemployment and adjustment: evidence from NAFTA using state level data

This article specifies a supply and demand model of the labour market to examine the effects of North American Free Trade Agreement (NAFTA) on the US labour market. Regression results suggest that NAFTA decreased yearly unemployment growth by 4.4%. Equivalently, NAFTA brought a structural break to the US state level unemployment. The second finding is that the labour market began feeling the impact of NAFTA immediately after its implementation and the labour market has continued to feel its effects probably through 2001.