IDEAS home Printed from https://ideas.repec.org/p/cgs/wpaper/117.html

The Real Effects of Brexit on Labor Demand: Evidence from Firm-level Data

Author

Listed:
  • Hang Do

    (University of Southampton)

  • Kiet Duong

    (University of York)

  • Toan Huynh

    (Queen Mary University of London)

  • Nam T. Vu

    (Miami University)

Abstract

Using the distance to the Irish border for UK firms that did not change their location after the 2016 Referendum to isolate the effects of Brexit at the firm level, we find Brexit implementation in 2020 caused exposed firms to cut their workforce by up to 15.7% on average relative to non-exposed firms. These exposed firms are also more likely to have lower growth expectations and more likely to increase their research and development (R&D) expenditure. Such results highlight the expectation channel and support the hypothesis that firms prioritize innovations in response to Brexit.

Suggested Citation

  • Hang Do & Kiet Duong & Toan Huynh & Nam T. Vu, 2024. "The Real Effects of Brexit on Labor Demand: Evidence from Firm-level Data," Working Papers 117, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    • Handle: RePEc:cgs:wpaper:117
    as

    Download full text from publisher

    File URL: http://cgr.sbm.qmul.ac.uk/CGRWP117.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ross Brown & José M. Liñares-Zegarra & John O.S. Wilson, 2022. "Innovation and borrower discouragement in SMEs," Small Business Economics, Springer, vol. 59(4), pages 1489-1517, December.
    2. Crispian Fuller, 2021. "Brexit and the discursive construction of the corporation," Journal of Economic Geography, Oxford University Press, vol. 21(2), pages 317-338.
    3. Ariel Burstein & Jonathan Vogel, 2017. "International Trade, Technology, and the Skill Premium," Journal of Political Economy, University of Chicago Press, vol. 125(5), pages 1356-1412.
    4. Van Reenen, John, 1997. "Employment and Technological Innovation: Evidence from U.K. Manufacturing Firms," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 255-284, April.
    5. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-1418, December.
    6. Sascha O Becker & Thiemo Fetzer & Dennis Novy, 2017. "Who voted for Brexit? A comprehensive district-level analysis," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 32(92), pages 601-650.
    7. Fernandes, Ana P. & Winters, L. Alan, 2021. "Exporters and shocks: The impact of the Brexit vote shock on bilateral exports to the UK," Journal of International Economics, Elsevier, vol. 131(C).
    8. Sylvain Weber & Martin Péclat, 2017. "A simple command to calculate travel distance and travel time," Stata Journal, StataCorp LLC, vol. 17(4), pages 962-971, December.
    9. Richard Harris & John Moffat, 2022. "The geographical dimension of productivity in Great Britain, 2011–18: the sources of the London productivity advantage," Regional Studies, Taylor & Francis Journals, vol. 56(10), pages 1713-1728, October.
    10. Daron Acemoglu & Pascual Restrepo, 2019. "Automation and New Tasks: How Technology Displaces and Reinstates Labor," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 3-30, Spring.
    11. Breinlich, Holger & Leromain, Elsa & Novy, Dennis & Sampson, Thomas, 2020. "Voting with their money: Brexit and outward investment by UK firms," European Economic Review, Elsevier, vol. 124(C).
    12. Geiger, Martin & Güntner, Jochen, 2024. "The chronology of Brexit and UK monetary policy," Journal of Monetary Economics, Elsevier, vol. 142(C).
    13. Davies, Ronald B. & Studnicka, Zuzanna, 2018. "The heterogeneous impact of Brexit: Early indications from the FTSE," European Economic Review, Elsevier, vol. 110(C), pages 1-17.
    14. Renato Faccini & Edoardo Palombo, 2021. "News Uncertainty in Brexit United Kingdom," American Economic Review: Insights, American Economic Association, vol. 3(2), pages 149-164, June.
    15. repec:oup:econjl:v:129:y:2019:i:10:p:2722-2744. is not listed on IDEAS
    16. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 163-184, Fall.
    17. Ross Brown & Jose Liñares-Zegarra & John O. S. Wilson, 2019. "The (potential) impact of Brexit on UK SMEs: regional evidence and public policy implications," Regional Studies, Taylor & Francis Journals, vol. 53(5), pages 761-770, May.
    18. Patrick Aubert & Eve Caroli & Muriel Roger, 2006. "New technologies, organisation and age: firm-level evidence," Economic Journal, Royal Economic Society, vol. 116(509), pages 73-93, February.
    19. Mary C Murphy, 2022. "Reshaping UK/Ireland relations: Brexit’s cross-border and bilateral impact," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 38(1), pages 205-216.
    20. Daniel Paravisini, 2008. "Local Bank Financial Constraints and Firm Access to External Finance," Journal of Finance, American Finance Association, vol. 63(5), pages 2161-2193, October.
    21. Douch, Mustaph & Huw Edwards, T., 2021. "The Brexit policy shock: Were UK services exports affected, and when?," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 248-263.
    22. David H. Autor & David Dorn & Gordon H. Hanson, 2015. "Untangling Trade and Technology: Evidence from Local Labour Markets," Economic Journal, Royal Economic Society, vol. 0(584), pages 621-646, May.
    23. Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
    24. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    25. Mark Thissen & Frank van Oort & Philip McCann & Raquel Ortega-Argilés & Trond Husby, 2020. "The Implications of Brexit for UK and EU Regional Competitiveness," Economic Geography, Taylor & Francis Journals, vol. 96(5), pages 397-421, October.
    26. Corsetti, Giancarlo & Crowley, Meredith & Han, Lu, 2022. "Invoicing and the dynamics of pricing-to-market: Evidence from UK export prices around the Brexit referendum," Journal of International Economics, Elsevier, vol. 135(C).
    27. Ellen R. McGrattan & Andrea Waddle, 2020. "The Impact of Brexit on Foreign Investment and Production," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(1), pages 76-103, January.
    28. Altig, David & Barrero, Jose Maria & Bloom, Nicholas & Davis, Steven J. & Meyer, Brent & Parker, Nicholas, 2022. "Surveying business uncertainty," Journal of Econometrics, Elsevier, vol. 231(1), pages 282-303.
    29. Benjamin Born & Gernot J Müller & Moritz Schularick & Petr Sedláček, 2019. "The Costs of Economic Nationalism: Evidence from the Brexit Experiment," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2722-2744.
    30. Tito Boeri & Giulia Giupponi & Alan B. Krueger & Stephen Machin, 2020. "Solo Self-Employment and Alternative Work Arrangements: A Cross-Country Perspective on the Changing Composition of Jobs," Journal of Economic Perspectives, American Economic Association, vol. 34(1), pages 170-195, Winter.
    31. Daniel Aaronson & Brian J Phelan, 2019. "Wage Shocks and the Technological Substitution of Low‐wage Jobs," The Economic Journal, Royal Economic Society, vol. 129(617), pages 1-34.
    32. Hill, Paula & Korczak, Adriana & Korczak, Piotr, 2019. "Political uncertainty exposure of individual companies: The case of the Brexit referendum," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 58-76.
    33. repec:dau:papers:123456789/10051 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Huynh, Anh Ngoc Quang, 2025. "Research and development fund allocation, high technology law, and firm investment choices," Economics Letters, Elsevier, vol. 253(C).
    2. Ge, Erqi, 2025. "Political speeches and stock market performance: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Do, Hang & Duong, Kiet Tuan & Huynh, Luu Duc Toan & Vu, Nam T., 2025. "The Real effects of Brexit on labor demand: Evidence from firm-level data," Journal of International Economics, Elsevier, vol. 157(C).
    2. Swati Dhingra & Thomas Sampson, 2022. "Expecting Brexit," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 495-519, August.
    3. Tarek Alexander Hassan & Stephan Hollander & Laurence van Lent & Ahmed Tahoun, 2020. "The Global Impact of Brexit Uncertainty," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-332, Boston University - Department of Economics.
    4. Tarek A. Hassan & Stephan Hollander & Laurence Van Lent & Ahmed Tahoun, 2024. "The Global Impact of Brexit Uncertainty," Journal of Finance, American Finance Association, vol. 79(1), pages 413-458, February.
    5. Ana Venâncio & João Pereira dos Santos, 2021. "The effect of Brexit on British workers living in the EU," Working Papers REM 2021/0197, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    6. Mustapha Douch & Terence Huw Edwards, 2022. "The bilateral trade effects of announcement shocks: Brexit as a natural field experiment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(2), pages 305-329, March.
    7. Nicholas Bloom & Philip Bunn & Scarlet Chen & Paul Mizen & Pawel Smietanka & Gregory Thwaites, 2019. "The impact of Brexit on UK firms," Bank of England working papers 818, Bank of England.
    8. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson, 2019. "Exchange rates and consumer prices: evidence from Brexit," CEP Discussion Papers dp1667, Centre for Economic Performance, LSE.
    9. Campos, Nauro F., 2019. "B for Brexit: A Survey of the Economics Academic Literature," IZA Discussion Papers 12134, Institute of Labor Economics (IZA).
    10. 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.
    11. Bosio, Andrea Odille & Butticè, Vicenzo & Crisanti, Andrea & Croce, Annalisa & Signore, Simone, 2025. "How Brexit reshaped venture capitals market: An analysis of UK and EU investments," Research Policy, Elsevier, vol. 54(8).
    12. Castro-Pires, Henrique & Mello, Marco & Moscelli, Giuseppe, 2023. "Foreign Nurses and Hospital Quality: Evidence from Brexit," IZA Discussion Papers 16616, Institute of Labor Economics (IZA).
    13. Zovanga Kone & Feicheng Wang & Zheng Wang & Zhuo Zhou, 2024. "Business as usual? Unraveling the impact of Brexit on UK‐EU business links," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 623-641, October.
    14. Ben Broadbent & Federico Di Pace & Thomas Drechsel & Richard Harrison & Silvana Tenreyro, 2019. "The Brexit vote, productivity growth and macroeconomic adjustments in the United Kingdom," Discussion Papers 51, Monetary Policy Committee Unit, Bank of England.
    15. Garcia-Lazaro, Aida & Mistak, Jakub & Gulcin Ozkan, F., 2021. "Supply chain networks, trade and the Brexit deal: a general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    16. Breinlich, Holger & Leromain, Elsa & Novy, Dennis & Sampson, Thomas, 2020. "Voting with their money: Brexit and outward investment by UK firms," European Economic Review, Elsevier, vol. 124(C).
    17. Jasmine Mondolo, 2022. "The composite link between technological change and employment: A survey of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1027-1068, September.
    18. Naser Makarem & Harjinder Singh & Nigar Sultana & Darren Henderson, 2023. "Policy uncertainty and real activities manipulation: evidence from Brexit," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1415-1440, November.
    19. Céline Carrère & Monika Mrázová & J Peter Neary, 2020. "Gravity Without Apology: the Science of Elasticities, Distance and Trade," The Economic Journal, Royal Economic Society, vol. 130(628), pages 880-910.
    20. Andreas M. Fischer & Pinar Yesin, 2023. "The kindness of strangers: Brexit and bilateral financial linkages," Working Papers 2023-02, Swiss National Bank.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgs:wpaper:117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Pedro S. Martins (email available below). General contact details of provider: https://edirc.repec.org/data/cgqmwuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.