Trade liberalization and job creation and destruction

Abstract

This paper shows a search model to analyze the possible impact of a trade liberalization on job creation and job destruction. The model is calibrated to calculate the possible impact of the North America Free Trade Agreement on the Mexican economy. The results show that the effects of NAFTA take place on the first two years. The production and the employment have a reduction of 0.14 and 0.16 percent, respectively, while the welfare level increases in 1.07%. The job creation and job destruction increases, and therefore there exists a higher job reallocation between sectors.