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

Author

Listed:
  • Felipe Brugués
  • Ayumu Ken Kikkawa
  • Yuan Mei
  • Pablo Robles

Abstract

This paper assesses the impact of the North American Free Trade Agreement on Mexican manufacturing plants’ output 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 the reductions in Mexican output tariffs, intermediate input tariffs, and U.S. tariffs on Mexican exports. We find that domestically sold products saw a decline in prices as Mexican plants faced more competition and gained access to cheaper inputs. Prices of exported goods fell only slightly as plants increased their markups in response to a favorable competitive environment due to declines in U.S. tariffs.

Suggested Citation

  • Felipe Brugués & Ayumu Ken Kikkawa & Yuan Mei & Pablo Robles, 2025. "The Impact of NAFTA on Prices and Competition: Evidence from Mexican Manufacturing Plants," NBER Working Papers 33516, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33516
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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