IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2024-04-27.html
   My bibliography  Save this article

Free Trade Agreements and Inequality: The Prospect for the UK Post-Brexit

Author

Listed:
  • Osama Alfalah

    (Gulf University for Science and Technology, Kuwait)

  • Mohammad Ali

    (The American University of Kuwait, Kuwait)

  • Abdullah Alhammadi

    (Independent Researcher)

Abstract

This paper examines the potential effects of Brexit on income inequality in the United Kingdom (UK) and utilizes empirical methods to predict these effects. The study focuses on the impact of trade and Foreign Direct Investment (FDI) on income inequality, using macroeconomic data from 1971 to 2019. By employing cointegration techniques and an Error Correction Model (ECM) on annual time series data, the analysis reveals that higher levels of trade have historically reduced income inequality in the UK over the long term. Consequently, changes in trade resulting from Brexit are expected to have a negative influence on the distribution of income and wealth in the UK. On the other hand, the study finds that higher FDI has only had a short-term negative effect on income distribution in the UK.

Suggested Citation

  • Osama Alfalah & Mohammad Ali & Abdullah Alhammadi, 2024. "Free Trade Agreements and Inequality: The Prospect for the UK Post-Brexit," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 245-252, July.
    • Handle: RePEc:eco:journ1:2024-04-27
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/15443/8064
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/15443
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Inglehart, Ronald F. & Norris, Pippa, 2016. "Trump, Brexit, and the Rise of Populism: Economic Have-Nots and Cultural Backlash," Working Paper Series 16-026, Harvard University, John F. Kennedy School of Government.
    2. Facundo Alvaredo & Lucas Chancel & Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2017. "Global Inequality Dynamics: New Findings from WID.world," American Economic Review, American Economic Association, vol. 107(5), pages 404-409, May.
    3. Roberta MONTEBELLO & Jonathan SPITERI & Philip VON BROCKDORFF, 2023. "Trade unions and income inequality: Evidence from a panel of European countries," International Labour Review, International Labour Organization, vol. 162(3), pages 481-503, September.
    4. Pandej Chintrakarn & Dierk Herzer & Peter Nunnenkamp, 2012. "Fdi And Income Inequality: Evidence From A Panel Of U.S. States," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 788-801, July.
    5. Nicholas Bloom & Paul M. Romer & Stephen J. Terry & John Van Reenen, 2013. "A Trapped-Factors Model of Innovation," American Economic Review, American Economic Association, vol. 103(3), pages 208-213, May.
    6. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Estimating the effects of free trade agreements on international trade flows using matching econometrics," Journal of International Economics, Elsevier, vol. 77(1), pages 63-76, February.
    7. Florence Jaumotte & Subir Lall & Chris Papageorgiou, 2013. "Rising Income Inequality: Technology, or Trade and Financial Globalization?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(2), pages 271-309, June.
    8. Dierk Herzer & Philipp Hühne & Peter Nunnenkamp, 2014. "FDI and Income Inequality—Evidence from Latin American Economies," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 778-793, November.
    9. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
    10. Mon, Yi Yi & Kakinaka, Makoto, 2020. "Regional trade agreements and income inequality: Are there any differences between bilateral and plurilateral agreements?," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 136-153.
    11. Changkyu Choi, 2006. "Does foreign direct investment affect domestic income inequality?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(12), pages 811-814.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Wenhao & Xu, Tao & Liu, Xiaoyi & Sun, Yongkun, 2023. "FDI inflows and income inequality: A Schumpeterian economic growth," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 805-820.
    2. repec:agr:journl:v:1(618):y:2019:i:1(618):p:73-88 is not listed on IDEAS
    3. Peter Mikek, 2023. "Financial deepening and income inequality: is there a financial Kuznetz curve in Latin America?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(1), pages 103-125, March.
    4. Kouassi YEBOUA, 2019. "Human capital and the FDI-Income inequality nexus in African countries: Panel smooth transition regression approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(618), S), pages 73-88, Spring.
    5. Muhammad Shahbaz & Mita Bhattacharya & Mantu Kumar Mahalik, 2017. "Finance and income inequality in Kazakhstan: evidence since transition with policy suggestions," Applied Economics, Taylor & Francis Journals, vol. 49(52), pages 5337-5351, November.
    6. Mehmet Akif DESTEK, 2018. "Dimensions of globalization and income inequality in transition economies: taking into account cross-sectional dependence," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 9, pages 5-25, December.
    7. Hrushikesh Mallick & Mantu Kumar Mahalik & Hemachandra Padhan, 2020. "Does globalization exacerbate income inequality in two largest emerging economies? The role of FDI and remittances inflows," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(4), pages 443-480, December.
    8. Silvio Traverso & Guido Bonatti, 2015. "Education and FDI: An Insight from US Outflows," Journal of Social Economics, Research Academy of Social Sciences, vol. 2(3), pages 101-116.
    9. Michael Beenstock & Daniel Felsenstein & Ziv Rubin, 2017. "Does foreign direct investment polarize regional earnings? Some evidence from Israel," Letters in Spatial and Resource Sciences, Springer, vol. 10(3), pages 385-409, October.
    10. García Muñoz, Teresa María & Milgram Baleix, Juliette & Odeh, Omar Odeh, 2020. "Inequality in Latin America: The role of the nature of trade and partners," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 14, pages 1-35.
    11. Kaixing Huang & Nicholas Sim & Hong Zhao, 2020. "Does Fdi Actually Affect Income Inequality? Insights From 25 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 34(3), pages 630-659, July.
    12. Sugiharso Safuan, 2017. "ASEAN-China Free Trade Area: An Assessment of Tariff Elimination Effect on Welfare," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 27-37.
    13. Samina Sabir & Nighat Aziz, 2018. "Impact of Health and Education on Income Inequality: Evidence from Selected Developing Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 10(4), pages 83-102, December.
    14. Suanes, Macarena, 2016. "Foreign direct investment and income inequality in Latin America: a sectoral analysis," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    15. Andoni Fornio Barusman & Dr. M. Yusuf Sulfarano Barusman, 2017. "The Impact of International Trade on Income Inequality in the United States since 1970's," European Research Studies Journal, European Research Studies Journal, vol. 0(4A), pages 35-50.
    16. En‐Ze Wang & Chien‐Chiang Lee, 2023. "Foreign direct investment, income inequality and country risk," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2415-2435, July.
    17. Anna Ploszaj & Tarlok Singh & Jen-Je Su, 2020. "Effects of FDI Flows and Trade Openness on Income Inequality: Evidence from Australia and the G7 Countries," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(3), pages 301-317, December.
    18. Xiang Li & Dan Su, 2021. "Does Capital Account Liberalization Affect Income Inequality?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(2), pages 377-410, April.
    19. Hebatalla Rezk & Goma Amer & Nahla Fathi & Sizhong Sun, 2022. "The impact of FDI on income inequality in Egypt," Economic Change and Restructuring, Springer, vol. 55(3), pages 2011-2030, August.
    20. Kalaichelvi Ravinthirakumaran & Navaratnam Ravinthirakumaran, 2018. "The impact of foreign direct investment on income inequality: a panel Autogressive Distributed Lag approach for the Asia-Pacific Economic Cooperation developing economies," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 25(1), pages 57-84, June.
    21. Dani Rodrik, 2018. "Populism and the economics of globalization," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 12-33, June.

    More about this item

    Keywords

    Brexit; Inequality; Trade; Foreign Direct Investment; Free Trade Agreements;
    All these keywords.

    JEL classification:

    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2024-04-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.