IDEAS home Printed from https://ideas.repec.org/p/zbw/cfswop/472.html
   My bibliography  Save this paper

The costs and benefits of leaving the EU

Author

Listed:
  • Ottaviano, Gianmarco
  • Pessoa, João Paulo
  • Sampson, Thomas
  • Van Reenen, John

Abstract

What would be the economic effects of the UK leaving the European Union on living standards of British people? We focus on the effects of trade on welfare net of lower fiscal transfers to the EU. We use a standard quantitative static general equilibrium trade model with multiple sectors, countries and intermediates, as in Costinot and Rodriguez-Clare (2013). Static losses range between 1.13% and 3.09% of GDP, depending on the assumptions used in our counterfactual scenarios. Including dynamic effects could more than double such losses.

Suggested Citation

  • Ottaviano, Gianmarco & Pessoa, João Paulo & Sampson, Thomas & Van Reenen, John, 2014. "The costs and benefits of leaving the EU," CFS Working Paper Series 472, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:472
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/102649/1/798138858.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Keller, Wolfgang, 2000. "Do Trade Patterns and Technology Flows Affect Productivity Growth?," The World Bank Economic Review, World Bank, vol. 14(1), pages 17-47, January.
    3. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    5. James Feyrer, 2019. "Trade and Income—Exploiting Time Series in Geography," American Economic Journal: Applied Economics, American Economic Association, vol. 11(4), pages 1-35, October.
    6. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, January.
    7. Albornoz, Facundo & Calvo Pardo, Héctor F. & Corcos, Gregory & Ornelas, Emanuel, 2012. "Sequential exporting," Journal of International Economics, Elsevier, vol. 88(1), pages 17-31.
    8. Magee, Christopher S.P., 2008. "New measures of trade creation and trade diversion," Journal of International Economics, Elsevier, vol. 75(2), pages 349-362, July.
    9. Méjean, Isabelle & Schwellnus, Cyrille, 2009. "Price convergence in the European Union: Within firms or composition of firms?," Journal of International Economics, Elsevier, vol. 78(1), pages 1-10, June.
    10. Julian Giovanni & Andrei A. Levchenko & Francesc Ortega, 2015. "A Global View Of Cross-Border Migration," Journal of the European Economic Association, European Economic Association, vol. 13(1), pages 168-202, February.
    11. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 87-117.
    12. Romain Wacziarg, 2001. "Measuring the Dynamic Gains from Trade," The World Bank Economic Review, World Bank, vol. 15(3), pages 393-39-429.
    13. Thomas Sampson, 2013. "Dynamic Selection and the New Gains from Trade with Heterogeneous Firms," 2013 Meeting Papers 125, Society for Economic Dynamics.
    14. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    15. Marc J. Melitz & Stephen J. Redding, 2014. "Missing Gains from Trade?," American Economic Review, American Economic Association, vol. 104(5), pages 317-321, May.
    16. Facundo Albornoz & Hector Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2012. "Sequential exporting: how firms break into foreign markets," CentrePiece - The magazine for economic performance 364, Centre for Economic Performance, LSE.
    17. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    18. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2011. "The Trade Effects of Endogenous Preferential Trade Agreements," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 113-143, August.
    19. repec:wsr:wpaper:y:2013:i:122 is not listed on IDEAS
    20. Scott L. Baier & Jeffrey H. Bergstrand & Peter Egger & Patrick A. McLaughlin, 2008. "Do Economic Integration Agreements Actually Work? Issues in Understanding the Causes and Consequences of the Growth of Regionalism," The World Economy, Wiley Blackwell, vol. 31(4), pages 461-497, April.
    21. Fabienne Ilzkovitz & Adriaan Dierx & Viktoria Kovacs & Nuno Sousa, 2007. "Steps towards a deeper economic integration: the internal market in the 21st century," European Economy - Economic Papers 2008 - 2015 271, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    22. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    23. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The "cost" bias
      by chris in Stumbling and Mumbling on 2015-02-27 20:04:22

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bastien Dufau, 2020. "The influence of a carbon tax on cost competitiveness," Working Papers 2005, Chaire Economie du climat.
    2. Agata Wierzbowska & Massimiliano Porto, 2024. "Did Brexiteers consider the business cycle of the UK trading partners?," SN Business & Economics, Springer, vol. 4(10), pages 1-18, October.
    3. Ansgar Belke & Daniel Gros, 2017. "The Economic Impact of Brexit: Evidence from Modelling Free Trade Agreements," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(3), pages 317-331, September.
    4. Stefanie Gäbler & Manuela Krause & Antonia Kremheller & Luisa Lorenz & Niklas Potrafke & Luisa Dörr, 2017. "Die Brexit-Verhandlungen – Inhalt und Konsequenzen für das Vereinigte Königreich und die EU," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(07), pages 55-59, April.
    5. Hosoe, Nobuhiro, 2018. "Impact of border barriers, returning migrants, and trade diversion in Brexit: Firm exit and loss of variety," Economic Modelling, Elsevier, vol. 69(C), pages 193-204.
    6. Pierre Boulanger & George Philippidis, 2015. "The End of a Romance? A Note on the Quantitative Impacts of a ‘Brexit’ from the EU," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(3), pages 832-842, September.
    7. Hagemejer, Jan & Dunin-Wasowicz, Maria & Michalek, Jan & Szyszka, Jacek, 2020. "Trade-related effects of Brexit. Implications for Central and Eastern Europe," Conference papers 333187, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Adele Bergin & Abian Garcia-Rodriguez & Edgar L. W. Morgenroth & Donal Smith, 2017. "Modelling the Medium- to Long-Term Potential Macroeconomic Impact of Brexit on Ireland," The Economic and Social Review, Economic and Social Studies, vol. 48(3), pages 305-316.
    9. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2016. "The Brexit Trade Disruption Revisited," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 17(1), pages 1-18.
    10. Swati Dhingra & Gianmarco Ottaviano & Veronica Rappoport & Thomas Sampson & Catherine Thomas, 2018. "UK trade and FDI: A post‐Brexit perspective," Papers in Regional Science, Wiley Blackwell, vol. 97(1), pages 9-24, March.
    11. Raffaele Giammetti, 2019. "Tariffs, Domestic Import Substitution and Trade Diversion in Input-Output Production Networks: how to deal with Brexit," Mo.Fi.R. Working Papers 152, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    12. Giammetti, Raffaele, 2019. "Tariffs, Domestic Import Substitution and Trade Diversion in Input-Output Production Networks: how to deal with Brexit," MPRA Paper 92835, University Library of Munich, Germany.
    13. Crafts, Nicholas, 2016. "The Growth Effects of EU Membership for the UK: a Review of the Evidence," CAGE Online Working Paper Series 280, Competitive Advantage in the Global Economy (CAGE).
    14. Petros E. Ioannatos, 2021. "Brexit or Euro for the UK? Evidence from Panel Data," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(1), pages 117-138, March.
    15. Arthur Korus & Kaan Celebi, 2019. "The impact of Brexit news on British pound exchange rates," International Economics and Economic Policy, Springer, vol. 16(1), pages 161-192, March.
    16. João Alves Bento & António Portugal Duarte, 2020. "Brexit: An Exploratory Analysis of the Macroeconomic Effects on the British Economy," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 67(4), pages 69-85, December.
    17. Halmai, Péter, 2020. "A dezintegráció gazdaságtana. A brexit esete [The economics of disintegration. The case of Brexit]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 837-877.
    18. Jafari, Yaghoob & Britz, Wolfgang, 2017. "Brexit – an economy-wide Impact Assessment looking into trade, immigration, and Foreign Direct Investment," Conference papers 332923, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    19. Kamil Kotlinski, 2018. "The economic consequences of leaving European Union by Great Britain," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 17(2), pages 157-167, June.
    20. Dreyer, Johannes Kabderian & Schmid, Peter Alfons, 2017. "Growth effects of EU and EZ memberships: Empirical findings from the first 15 years of the Euro," Economic Modelling, Elsevier, vol. 67(C), pages 45-54.

    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. Swati Dhingra & Hanwei Huang & Gianmarco Ottaviano & João Paulo Pessoa & Thomas Sampson & John Van Reenen, 2017. "The costs and benefits of leaving the EU: trade effects," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 32(92), pages 651-705.
    2. Kamil Kotlinski, 2018. "The economic consequences of leaving European Union by Great Britain," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 17(2), pages 157-167, June.
    3. Esposito, Federico, 2022. "Demand risk and diversification through international trade," Journal of International Economics, Elsevier, vol. 135(C).
    4. Glenn Magerman & Karolien De Bruyne & Jan Van Hove, 2020. "Pecking order and core‐periphery in international trade," Review of International Economics, Wiley Blackwell, vol. 28(4), pages 1113-1141, September.
    5. Halmai, Péter, 2020. "A dezintegráció gazdaságtana. A brexit esete [The economics of disintegration. The case of Brexit]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 837-877.
    6. Halmai, Péter, 2024. "Mélyintegráció-paradigma [Deep-integration Paradigm]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 514-558.
    7. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    8. Esposito, Federico, 2019. "Demand Risk and Diversification through Trade," MPRA Paper 99875, University Library of Munich, Germany.
    9. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    10. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.
    11. Bolatto, Stefano & Moramarco, Graziano, 2023. "Gains from trade and their quantification: Does sectoral disaggregation matter?," International Economics, Elsevier, vol. 174(C), pages 44-68.
    12. Kikkawa, Ayumu Ken & Sasahara, Akira, 2020. "Gains from trade and the sovereign bond market," European Economic Review, Elsevier, vol. 124(C).
    13. Jareb, Colin & Nigai, Sergey, 2022. "Gravity models and the Law of Large Numbers," Economics Letters, Elsevier, vol. 221(C).
    14. Cheong, Juyoung, 2023. "Do preferential trade agreements stimulate high-tech exports for low-income countries?," Economic Modelling, Elsevier, vol. 127(C).
    15. Jackson, Karen & Shepotylo, Oleksandr, 2018. "Post-Brexit trade survival: Looking beyond the European Union," Economic Modelling, Elsevier, vol. 73(C), pages 317-328.
    16. Latorre, María C. & Olekseyuk, Zoryana & Yonezawa, Hidemichi & Robinson, Sherman, 2020. "Making sense of Brexit losses: An in-depth review of macroeconomic studies," Economic Modelling, Elsevier, vol. 89(C), pages 72-87.
    17. Lorenzo Caliendo & Luca David Opromolla & Fernando Parro & Alessandro Sforza, 2021. "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement," Journal of Political Economy, University of Chicago Press, vol. 129(12), pages 3491-3545.
    18. Gang Chen & Xue Dong & Patrick Minford & Guanhua Qiu & Yongdeng Xu & Zequn Xu, 2022. "Computable General Equilibrium Models of Trade in the Modern Trade Policy Debate," Open Economies Review, Springer, vol. 33(2), pages 271-309, April.
    19. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson, 2021. "Import liberalization as export destruction? Evidence from the United States," CEP Discussion Papers dp1779, Centre for Economic Performance, LSE.
    20. Benedikt Heid, 2014. "Essays on International Trade and Development," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 55.

    More about this item

    Keywords

    Trade; European Union; welfare;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:zbw:cfswop:472. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/ifkcfde.html .

    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.