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The Effect of Brexit on UK Productivity: Synthetic Control Analysis

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  • Farid, Moatazbellah

Abstract

In this paper I analyse the effect of Brexit on UK labour productivity and its components using a synthetic control methodology. My results show that the Brexit vote had a negative impact on labour productivity, causing GDP per hour worked to decrease by 2.4% by 2019 in comparison to the absence of Brexit. The two components of labour productivity are GDP and hours worked. I find that the decrease in the GDP is more than the increase in hours worked per person, causing the labour productivity to decline

Suggested Citation

  • Farid, Moatazbellah, 2020. "The Effect of Brexit on UK Productivity: Synthetic Control Analysis," MPRA Paper 103165, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:103165
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    File URL: https://mpra.ub.uni-muenchen.de/103166/9/MPRA_paper_103166.pdf
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    References listed on IDEAS

    as
    1. 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).
    2. Benjamin Born & Gernot J Müller & Moritz Schularick & Petr Sedláček, 2019. "The Costs of Economic Nationalism: Evidence from the Brexit Experiment," Economic Journal, Royal Economic Society, vol. 129(623), pages 2722-2744.
    3. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2015. "Comparative Politics and the Synthetic Control Method," American Journal of Political Science, John Wiley & Sons, vol. 59(2), pages 495-510, February.
    4. repec:oup:econjl:v:129:y:2019:i:10:p:2722-2744. is not listed on IDEAS
    5. Michael Gasiorek & Ilona Serwicka & Alasdair Smith, 2019. "Which manufacturing industries and sectors are most vulnerable to Brexit?," The World Economy, Wiley Blackwell, vol. 42(1), pages 21-56, January.
    6. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    7. Harvey, A. & Thiele, S., 2017. "Co-integration and control: assessing the impact of events using time series data," Cambridge Working Papers in Economics 1731, Faculty of Economics, University of Cambridge.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Brexit; Labour productivity; Productivity puzzle; Synthetic control method;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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