Brexit application of trade liberalisation - Dhingra et al (2016)

Static effects

Optimistic - 1.3% fall in avg income (£850 lost per household)

Pessimistic - 2.6% fall (£1700 ph)

UK unilaterally removing all tariffs

Opti - 1% fall

Pess - 2.3%

• TC costs down worldwide so gains from trade come into play

• main trading partner lost but some increased trade

  • Efficiency gains + variety gain

Effects on productivity

6.3%-9.5% loss of GDP - £4200-6500 ph

• Trade protectionism increases min efficiency level to stay in business

• Reduces avg productivity through selection & learning by doing/exporting channel

• dynamic loss

Small vs large country effects

UK loses bargaining power as it only makes up 18% of EU single market

Worse deals signed and more barriers

• fewer varieties + dom firms struggle to export

• Leads to falling productivity & welfare losses