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    Mexican immigration and NAFTA by Welch, Alexander

    Mexican-American immigration is positively related to Mexico’s macro and micro economic conditions. Empirical evidence shows that the effects of NAFTA are mixed. The trade policy raised the demand for skill by reducing rents in industries that previously paid high wages, increased FDI (foreign direct investment), increased Mexican-American trade and economic integration, and caused a reshuffling of unskilled wages in both Mexico and the US. These effects possess a positive relationship to geographical location and economies of scale, with northern states reaping the benefits of higher wages, more investment, and more trade. Although NAFTA was a step in the right direction, it has been overshadowed by the lingering effects of inflationary public investment. These policies inefficiently allocated resources in priority sectors and demographic shifts within the Mexican population. Neoclassical economic theory predicts convergence in goods prices across countries. This will lead to stable economic conditions for Mexico, thereby mitigating the push factors involved in Mexican-American emigration. Hypothesis: NAFTA significantly decreased immigration since implementation.