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Measuring the Regional Economic Cost of Brexit: Evidence up to 2019

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  • Fetzer, Thiemo
  • Wang, Shizhuo

Abstract

Following the UK's vote to Leave the European Union, the UK's recorded record levels of employment. This led many pundits to claim that the downbeat forecasts for the UK's economy following the Brexit vote was simply capturing that these forecasts were biased and part of ``project fear.'' This paper studies the cost of the Brexit-vote to date across UK regions finding significant evidence that suggests that the economic costs of the Brexit-vote are sizable and far from evenly distributed across the UK. Among 382 districts, at least 168 districts appear to be Brexit-vote losers, having lost, on average 8.54 percentage points of output in 2018 compared to their respective synthetic controls. The results suggest that the economic losses in region- and district-level output due to the Brexit-vote are: a) increasing in a districts propensity to have supported Leave in 2016; b) concentrated in districts with notable employment or gross-value added activity in manufacturing; c) concentrated in districts with a resident population with relatively low levels of human capital. The Brexit-vote induced economic divergence across regions is already exacerbating regional economic inequalities that became so apparent in the 2016 EU referendum vote patterns. Further, there is some evidence suggesting that the regional economic impact of COVID19 may exacerbate the regional economic impact of the Brexit-vote to date.

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  • Fetzer, Thiemo & Wang, Shizhuo, 2020. "Measuring the Regional Economic Cost of Brexit: Evidence up to 2019," CEPR Discussion Papers 15051, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15051
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    Cited by:

    1. Blackaby, David H. & Drinkwater, Stephen & Robinson, Catherine, 2020. "Regional Variations in the Brexit Vote: Causes and Potential Consequences," IZA Discussion Papers 13579, Institute of Labor Economics (IZA).
    2. Swati Dhingra & Thomas Sampson, 2022. "Expecting Brexit," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 495-519, August.
    3. Fingleton Bernard & Gardiner Ben & Martin Ron & Barbieri Luca, 2023. "The impact of brexit on regional productivity in the UK," ZFW – Advances in Economic Geography, De Gruyter, vol. 67(2), pages 142-160, August.
    4. Thiemo Fetzer & Ivan Yotzov, 2023. "(How) Do Electoral Surprises Drive Business Cycles? Evidence from a New Dataset," CESifo Working Paper Series 10584, CESifo.
    5. Gabriele Camera & Lukas Hohl & Rolf Weder, 2023. "Inequality as a barrier to economic integration? An experiment," Experimental Economics, Springer;Economic Science Association, vol. 26(2), pages 383-411, April.
    6. Kai Fischer, 2023. "Skilled Labour Migration and Firm Performance: Evidence from English Hospitals and Brexit," CESifo Working Paper Series 10747, CESifo.

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    More about this item

    Keywords

    Brexit; Economic impact; Evaluation; Trade barriers;
    All these keywords.

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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