The real effects of Brexit on labor demand: evidence from firm-level data

Do, Hang, Duong, Kiet, Huynh, Toan and Vu, Nam (2024) The real effects of Brexit on labor demand: evidence from firm-level data (Centre for Global Research Working Paper, 117) Queen Mary University London 54pp.

Record type: Monograph (Working Paper)

Abstract

Using the most comprehensive longitudinal survey on small and medium-sized businesses in the United Kingdom to date, we study how the actual implementation of Brexit in 2020 impacts their labor demand. Our identification strategy hinges on using the distance to the Irish border for firms that did not change location after the Referendum as a novel instrument to isolate the effects of Brexit at the firm level. We find that the 2020 implementation of Brexit caused exposed firms to cut their workforce by up to 16.5% on average. These exposed firms are also more likely to have lower growth expectations and more likely to increase their research and development (R&D) expenditure. Such results highlight the expectation channel and support the hypothesis that firms prioritize innovations in response to Brexit.

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