An Estimation of the Effects of Brexit on Trade and Migration

Abstract

This paper uses a gravity model approach to estimate the effects of Brexit in two dimensions: trade in goods and migration. We simulate two scenarios: 1) no agreement with reversion to WTO rules and no special treatment for migrants; 2) signature of a bilateral free trade agreement (FTA). According to our results, Brexit may have large negative effects on trade and migration flows between the EU and the UK. In the WTO scenario, trade flows are predicted to drop by 30% and migration by close to 25%. If the UK and the EU sign an FTA-like agreement (which does not include free mobility of labour), the negative effects on trade are lessened although there is no significant difference in terms of migration with respect to the WTO scenario.

Estimating the Impact of EU Membership on United Kingdom’s Export by Using Gravity Model

“…One common approach in the Brexit-related research is to use gravity models, in order to first estimate how changes to trade barriers could affect trade flows and then feed these estimates into a model of UK and world economic activity. Campos and Timini (2019) develop structural gravity models with the aim of estimating how trade and migration between the EU and the UK are affected by Brexit. The analysis points to robust negative effects on migration flows for the UK and drop in the mutual trade flows by up to 30% (under the WTO scenario).…”

The Effect of Brexit on British Workers Living in the EU

“…In terms of migration, the studies suggest that Brexit restrictions are likely to lead to a labour shortage 1 and to a marginal increase in wages for low-skill workers, but, most importantly, it is likely to have a significant reduction on GDP per capita and productivity (Portes and Forte, 2017;Campos and Timini, 2019), particularly in sectors that rely on EU highly skilled workers, such as in the financial sector (Sampson, 2017). Some studies even suggest that the economic impacts of migration are higher than the economic impacts of FDI or trade, mostly due to the relevance of intellectual capital and the skill composition of UK migration (Boubtane et al, 2016;Booth et al, 2015;Portes and Forte, 2017).…”

“…Several studies have evaluated the migration implications after Brexit on the UK economy (Portes and Forte, 2017;Campos and Timini, 2019;Boubtane et al, 2016;Jafari and Britz, 2017;Parker, 2017;Portes and Forte, 2017;Portes, 2021), however knowledge regarding the impact of Brexit on the remaining EU countries is scarce. This lack of attention is striking, considering that 1.2 million British citizens were living in an EU country in 2015 (United Nations and Social Affairs, 2019).…”

A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement

“…For example,Baier et al (2019b) simulated the implementation of the Transatlantic Trade and Investment Partnership (TTIP), an agreement negotiated (but not approved) between the US and the EU. El-Dahrawi Sánchez-Albornoz and Timini(2021) studied the potential trade and welfare effects of deeper trade integration and of episodes of trade disintegration in Latin America Campos and Timini (2019). evaluated the effects of Brexit (that is, the UK exit from the European Union).Mayer et al (…”