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Economic Analysis of Multinationals Firms in the UK after Brexit

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  • Ortiz Valverde, Gabriela
  • Latorre, María C.

Abstract

This paper provides an impact assessment of Brexit considering the role of foreign multinationals enterprises (MNEs) in the United Kingdom (UK). We extend our previous research, which has estimated the potential impact of Brexit focusing on migration and trade (Ortiz and Latorre; 2018a, 2018b) including the impact of a reduction in the inflow of FDI and the effect of fiscal savings once Brexit comes into force. The incorporation of FDI and multinationals' operations in the analysis of Brexit has received scarce attention in the literature (Fernández-Pacheco et al, 2018a; Fernández-Pacheco et al, 2018b). However, it could lead to closer results to the potential effects of Brexit and therefore identify possible ways to minimize its negative impact. In this paper, we provide results not only related to FDI falls and fiscal savings but also those produced by the rest of dimensions considered in the study (tariffs, non-tariffs barriers, and immigration restrictions). To this aim, we use a recursive dynamic computable general equilibrium (CGE) model, namely, the GTAP Recursive Dynamic (GTAP-RD) model (Aguiar et al., 2019), which incorporates imperfect competition, increasing returns to scale and Melitz specification based on the parsimonious GTAP-AEKM (Armington-Ethier-Krugman-Melitz) extension. The model will distinguish 21 sectors and five regions: UK, EU, US, China, and ROW). The model allows estimating the impact on GDP, welfare, wages, and capital remuneration, together with the evolution of aggregate and sectoral output, exports and imports.

Suggested Citation

  • Ortiz Valverde, Gabriela & Latorre, María C., 2019. "Economic Analysis of Multinationals Firms in the UK after Brexit," Conference papers 333099, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333099
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    References listed on IDEAS

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