CEP Brexit analysis
‘ECONOMISTS FOR BREXIT’: A critique
Swati Dhingra, Gianmarco Ottaviano, Thomas Sampson and John Van Reenen
Paper No' CEPBREXIT06:
Press Release - Friday 27th May 2016
'Economists For Brexit': A critique
The handful of economists who support the UK leaving the European Union (EU) argue that by unilaterally abolishing all import tariffs, Brexit would boost the economy by 4% - a result that is in sharp contrast with all other economic analysis.
The latest in a series of #CEPBrexit reports, published by the Centre for Economic Performance (CEP) at the London School of Economics, explains how the 'Economists for Brexit' fail to grasp basic facts about the nature of regulation, product standards and international trade.
A more realistic assessment shows that Brexit plus 'unilateral trade liberalisation' would still lead to a drop in UK living standards. The new CEP report shows that:
"Using an approach that does such violence to basic facts of economic life is why Minford's 'Liverpool model' has such an awful record of analysing major policy changes. His model was predicting enormous job losses from the introduction of the National Minimum Wage in 1999. In the event, multiple studies have shown there was effectively no increase in unemployment."
CEP director John Van Reenen adds:
"Minford's style of work was popular in some quarters in the 1970s. In those days, economic analysis did not need to be well-grounded in facts and data, and could rely on highly simplified theories. The revolution in recent years has been the explosion of data and empirical techniques for its analysis."
Swati Dhingra says:
"Minford's model is inconsistent with two basic facts about international trade: first, that trade satisfies the gravity equation; and second, that the EU has been trade-creating, not simply a tool for trade diversion. This is why his model gives such unreliable predictions of the consequences of Brexit for trade and living standards.
"When we analyse the same scenario using modern economics that incorporates advances in our understanding of international trade data since the 1960s and a more realistic assessment of how UK 'unilateral trade liberalisation' could actually work, we find (alongside just about everyone else) that Brexit leads to a decline in UK living standards."
Gianmarco Ottaviano concludes:
"Minford's approach of downplaying the empirical analysis of the impact of trade seems to be predicated on the view that because statistical analysis is imperfect, it can safely be ignored. But such statistical biases may just as easily reinforce rather than weaken the case for remaining in the EU."
For further information, contact:Swati Dhingra on +44 (0)20 7955 7804, Email: firstname.lastname@example.org
Gianmarco Ottaviano, Email: email@example.com
Thomas Sampson on +44 (0)20 7955 7408, Email: firstname.lastname@example.org
John Van Reenen on +44(0)7803 614137 / +44 (0)20 7955 7049, Email: email@example.com
Helen Durrant on +44 (0)20 7955 7395; Email: firstname.lastname@example.org
Romesh Vaitilingam on +44(0)7768 661095, Email: email@example.com
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