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Morning Star:
Brexit does reduce the fiscal deficit

13 May 2016

According to various studies at the Centre for Economic Performance (CEP) of the London School of Economics, Brexit does reduce the fiscal deficit. That would be, according to CEP, the main benefit. The principal cost would be less trade with the European Union. A big uncertainty in these studies is what it means to be outside the EU, since there is no exit agreement. How high would tariffs and other trade barriers be? In a static model, with no changes, for example, in productivity, the CEP analyses predict a cost between 1.3% and 2.6% of GDP.

Besides trade and fiscal costs, a big factor in the long term is immigration. The UK has historically been a magnet for migrants. The educated ones are attracted by The City; the unskilled ones find jobs at the low end of the services industry. This would remain true, at least in the medium term, inside or outside the EU, but Brexit would presumably reduce entry of EU citizens. European immigrants contribute positively to UK's finances and, perhaps, productivity as well. After immigration and foreign direct investment, and their effect on productivity, are baked in, the cost estimated by CEP rises to 6%-9% of GDP.

This article was published by the Morning Star on May 13, 2016
Link to article here

Related publications
See the complete CEP Brexit Analysis Series here

Related links
Swati Dhingra webpage
Hanwei Huang webpage
Gianmarco Ottaviano webpage
Thomas Sampson webpage
John Van Reenen webpage
Jonathan Wadsworth webpage
Labour Markets Programme webpage
Trade Programme webpage
Growth Programme webpage

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