The costs and benefits of leaving the EUtrade effects

Resumo

This paper estimates the welfare effects of Brexit, focusing on trade and fiscal transfers. We use a standard quantitative general equilibrium trade model with many countries and sectors and trade in intermediates, as in Costinot and Rodr´ıguez-Clare (2014). We simulate a range of counterfactuals reflecting alternative options for EU-UK relations following Brexit. Welfare losses for the average UK household are 1.3% if the UK remains in the EU’s Single Market like Norway (a “soft Brexit”). Losses rise to 2.7% if the UK trades with the EU under World Trade Organization rules (a “hard Brexit”). A reduced form approach that captures the dynamic effects of Brexit on productivity more than triples these losses and implies a decline in average income per capita of between 6.3% and 9.4%, partly via falls in foreign investment. These negative effects are widely shared across the entire income distribution and are unlikely to be offset from new trade deals.

Ficha do documento

Tipo

Outro

Ano

2017

Instituição

Fundação Getulio Vargas

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/19466

Temas

EconomiaFinanças Públicas

Palavras-chave

TradeBrexitGeneral equilibriumEconomiaUnião EuropeiaGrã-Bretanha - Tratados comerciaisGrã-Bretanha - Relações econômicas exteriores