The Impact of NAFTA on Prices and Competition: Evidence from Mexican Manufacturing Plants

76 Pages Posted: 10 Jul 2019 Last revised: 18 Nov 2021

See all articles by Ayumu Ken Kikkawa

Ayumu Ken Kikkawa

University of British Columbia (UBC) - Sauder School of Business

Yuan Mei

Singapore Management University - School of Economics

Pablo Robles Santamarina

The Brattle Group

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Date Written: 2019

Abstract

This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ prices and markups. We distinguish between Mexican goods that are exported and those sold domestically, and decompose their prices separately into markups and marginal costs. We then analyze how these components were affected by reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs. We find that declines in these tariffs led to significant reductions in the marginal costs of Mexican products. However, prices of exported goods slightly increased as exporters increased their markups in response to declines in U.S. tariffs.

Suggested Citation

Kikkawa, Ayumu Ken and Mei, Yuan and Santamarina, Pablo Robles, The Impact of NAFTA on Prices and Competition: Evidence from Mexican Manufacturing Plants (2019). CESifo Working Paper No. 7700, Available at SSRN: https://ssrn.com/abstract=3416873 or http://dx.doi.org/10.2139/ssrn.3416873

Ayumu Ken Kikkawa (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

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Yuan Mei

Singapore Management University - School of Economics ( email )

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Pablo Robles Santamarina

The Brattle Group

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