International Trade and Labor Productivity in the United States: A NAFTA Perspective

Abstract

The North American Free Trade Agreement (NAFTA) celebrated its twentieth anniversary in 2014. The objective of NAFTA was to increase the efficiency and fairness of trade among the United States, Canada, and Mexico. This study utilizes industry-level panel data over the period 1987-2016 to evaluate labor productivity in the United States within key manufacturing industries since the United States joined NAFTA. Growth in labor productivity is an important economic driver of rising economic output and improved living standards. Results show bi-directional correlations between trade, exchange rates, and labor productivity, which underscore the impact of NAFTA on the United States’ labor market.