Trade and FDI-Related Impacts of Brexit
33 Pages Posted: 30 Apr 2018
Date Written: April 25, 2018
We offer a general equilibrium analysis of Brexit incorporating the state-of-the-art differences in productivity and firms’ selection within manufacturing sectors à la Melitz (2003) and multinationals in services. Trade, output and average productivity diminish across most sectors in the UK and the Rest of the European Union (REU), as well as GDP, welfare, wages and capital remuneration. However, the UK loses more due to the missing preferential access to the huge EU market. Emergence of barriers against multinationals explains approximately one third of the negative effect in both the UK and REU. Other regions remain nearly unaffected.
Keywords: Multinationals, CGE, Melitz, Monopolistic Competition, Trade in Services
JEL Classification: C68, F14, F15, F17, F21
Suggested Citation: Suggested Citation