Potential Consequences of Post-Brexit Trade Barriers for Earnings Inequality in the UK

71 Pages Posted: 18 Aug 2020

See all articles by Rachel Griffith

Rachel Griffith

Institute for Fiscal Studies (IFS); University of Manchester; Centre for Economic Policy Research (CEPR)

Peter Levell

Institute for Fiscal Studies (IFS)

Agnes Norris Keiller

affiliation not provided to SSRN

Date Written: August 2020

Abstract

We examine the distributional consequences of post-Brexit trade barriers on wages in the UK. We quantify changes in trade costs across industries accounting for input-output links across domestic industries and global value chains. We allow for demand substitution by firms and consumers and worker reallocation across industries. We document the impact at the individual and household level. Blue-collar workers are the most exposed to negative consequences of higher trade costs, because they are more likely to be employed in industries that face increases in trade costs, and are less likely to have good alternative employment opportunities available in their local labour markets. Overall new trade costs have a regressive impact with lower-paid workers facing higher exposure than higher-paid workers once we account for the exposure of other household members.

Keywords: income distribution, inequality, Trade

JEL Classification: D33, D57, F61, F66, J20

Suggested Citation

Griffith, Rachel and Levell, Peter and Norris Keiller, Agnes, Potential Consequences of Post-Brexit Trade Barriers for Earnings Inequality in the UK (August 2020). Available at SSRN: https://ssrn.com/abstract=3674902

Rachel Griffith (Contact Author)

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London WC1E 7AE
United Kingdom
+44 20 7291 4800 (Phone)
+44 20 7323 4780 (Fax)

University of Manchester ( email )

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Manchester, M13 9PL
United Kingdom

HOME PAGE: http://www.ifs.org.uk/people/profile?id=37

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Peter Levell

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Agnes Norris Keiller

affiliation not provided to SSRN

No Address Available

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