The Equation Trade Gains Are Only Half the Story

The North American Free Trade Agreement, which went into effect in 1994, greatly reduced tariffs between the United States, Mexico, and Canada. Since then, the US has experienced small but positive aggregate economic gains, according to standard trade models. But those gains came along with manufacturing job losses, which are associated with higher mortality in affected areas, according to research by MIT’s Amy Finkelstein, Chicago Booth’s Matthew J. Notowidigdo, and MIT PhD student Steven Shi. 

The researchers translated the mortality effects into consumption-equivalent terms, assigning a value to each year of life and expressing the decline in life expectancy in the same units as income and purchasing power. They find that the welfare losses from fewer years of life could offset or even exceed the estimated gains from NAFTA. To learn more, read “Free Trade May Have Cost American Lives as Well as Jobs.”