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This paper studies consequences of the very large exchange rate depreciation occurring in June 2016 due to the UK electorate unexpectedly voting to leave the European Union. As news of a leave vote came in, the value of sterling plummeted, recording the biggest one day depreciation of any of the world’s four major currencies since the collapse of Bretton Woods. The prospect of Brexit really happening generated sizable differences in how much sterling depreciated against different currencies. Coupled with pre-referendum cross-country trade patterns, this generated variations in exchange rate depreciations facing businesses in different industries. The paper first considers revenue and cost channels operating through trade price responses, offering evidence of a cost shock from the price of intermediate imports rising by more in higher depreciation industries, but with no revenue offset from exports. Workers were impacted by the increased cost pressures facing businesses, not in terms of job loss but through relative real wage declines and stagnation for workers employed in industries facing larger depreciations.

The Brexit vote precipitated the unravelling of the UK's membership of the world's deepest economic integration agreement. This paper reviews evidence on the realized economic effects of Brexit. The 2016 Brexit referendum changed expectations about future UK-EU relations. Studying its consequences provides new insights regarding the economic impacts of news and uncertainty shocks. Voting for Brexit had large negative effects on the UK economy between 2016 and 2019, leading to higher import and consumer prices, lower investment, and slower real wage and GDP growth. However, at the aggregate level, there was little or no trade diversion away from the EU, implying that many of the anticipated long-run effects of Brexit did not materialize before the new UK-EU trade relationship came into force in 2021.

The Brexit vote precipitated the unravelling of the UK's membership of the world's deepest economic integration agreement. This paper reviews evidence on the realized economic effects of Brexit. The 2016 Brexit referendum changed expectations about future UK-EU relations. Studying its consequences provides new insights regarding the economic impacts of news and uncertainty shocks. Voting for Brexit had large negative effects on the UK economy between 2016 and 2019, leading to higher import and consumer prices, lower investment, and slower real wage and GDP growth. However, at the aggregate level, there was little or no trade diversion away from the EU, implying that many of the anticipated long-run effects of Brexit did not materialize before the new UK-EU trade relationship came into force in 2021.

International audience; Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for common-input capabilities, using a policy that removed entry barriers in input markets to show that the similarity of a firm’s and an industry’s input mix determines firm production choices. We model industry choice and economies of scope from input capabilities. When the model is estimated for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of coproduction rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.

Deep trade agreements are widespread and have taken the world beyond tariff liberalization in goods trade. As the importance of global supply chains and the services sector increased across the world, shallow tariff reductions gave way to deeper commitments that address non-tariff barriers and behind the border barriers to trade. This paper shows that deep trade agreement commitments increase trade by 25% for trade in goods and by even more for trade in services. Taking reduced form estimates to a quantitative model enables general equilibrium analysis of the trade and welfare impacts of deep trade agreements. We find that China, India, and the Eastern European bloc have benefited the most from trade agreements since the Uruguay Round. While a large share of the gains to Eastern Europe come from deep commitments during its accession to the EU, gains for China and India come largely from tariff reductions. Applying the framework to ex-ante analysis of the UK’s departure from the deepest trade agreement in the world suggests that the potential benefits the UK may gain, post-Brexit, from future deep agreements with the EU and selected nonEU trade partners would not offset its losses from leaving the EU. Overall, deep trade agreements have contributed over 40% to the welfare gains from trade globally and even more so for advanced economies.

In India-Export Measures, the United States challenged a range of Indian measures as prohibited export-contingent subsidies, and a WTO panel largely agreed. This article examines the factors at play in the United States’ decision to bring the challenge. At the level of policy, the United States case reflects India’s graduation from the protections afforded developing nations’ export-contingent subsidies under the Agreement on Subsidies and Countervailing Measures. A closer examination, however, shows that India ramped up its export-contingent subsidies just as the SCM Agreement required it to wind those subsidies down. Moreover, the expanded Indian subsidies led to increased import competition with the politically influential metals and pharmaceutical sectors in the United States, which pushed the U.S. challenge. We reflect on the larger implications of the challenge for the future of trade rules on industrial policy. In particular, we note that the United States pursued a trade enforcement policy that would have the effect of increasing pharmaceutical prices in the United States, by reducing subsidies for imported generic drugs, at a time at which the Trump administration allegedly was trying to reduce the price of prescription drugs. This disconnect suggests the need for both greater transparency in trade policy and greater governmental coordination on the connection between trade policy and other policy priorities.

This paper uses a new field survey of low-wage areas of urban India to show that employment and earnings were decimated by the lockdown resulting from the Covid-19 crisis. It examines workers’ desire for a job guarantee in this setting. Workers who had a job guarantee before the crisis were relatively shielded by not being hit quite so hard in terms of the increased incidence of job loss or working zero hours and earnings losses. A stated choice experiment contained in the survey reveals evidence that low-wage workers are willing to give up around a quarter of their daily wage for a job guarantee. And direct survey questions corroborate this, with informal, young and female workers being most likely to want a job guarantee, and to want it even more due to the current crisis.

Policies to encourage agribusinesses-led development of crop markets are high on the agenda of many policy-makers. Since the 1980s, several countries have moved to a model in which agribusinesses provide market access to farmers. The motivation behind these policies is to raise income and wellbeing, particularly for low-income rural households. Yet, systematic analyses of the overall impact of such policies on household welfare are scant. This paper provides a novel modelling framework to study the role of agribusinesses in shaping the gains from trade and the share accruing to small farmers. Exploiting a national policy change in Kenya in 2004, we find that the shift to the agribusiness model reduced farmer incomes from policy-affected crops, relative to other crops. The relative fall in incomes was higher for farmers selling primarily to large agribusinesses. Correspondingly, agribusiness firms specialized in policy-affected crops saw larger increases in profit margins. Farmers in villages with a comparative advantage in policy-affected crops saw larger reductions in consumption, especially of durable assets. The findings contribute to the academic and policy debate on the impact of market power on the size and distribution of the gains from trade.

Grand challenges are complex problems that are common to much of society, affect large populations, and may have several possible solutions. Incorporation of grand challenges into higher education courses can facilitate the development of collaborative problem-solving skills while providing relevant and practical opportunities to experience the dynamics involved in real-world work. Although grand challenges are becoming more commonly used in higher education, to date, there has been no synthesis of how grand challenges are incorporated and the learning outcomes of engaging in grand challenge work. In this scoping review, we examined and mapped the state of evidence for the use of grand challenges in higher education. We conducted the review according to the Johanna Briggs Institute methodology for scoping reviews and considered quantitative, qualitative, and mixed-methods studies as well as literature reviews, program descriptions, and opinion papers published in English without limitations on year of publication. We used a data extraction tool to synthesize and present our findings in a tabular form with accompanying narrative summaries. The results reveal a growing global interest in the use of grand challenges in higher education while highlighting a lack of rigorous empirical evidence on the impact on student learning.

This paper uses a new field survey of low-wage areas of urban India to show that employment and earnings were decimated by the lockdown resulting from the Covid-19 crisis. It examines workers' desire for a job guarantee in this setting. Workers who had a job guarantee before the crisis were relatively shielded by not being hit quite so hard in terms of the increased incidence of job loss or working zero hours and earnings losses. A stated choice experiment contained in the survey reveals evidence that low-wage workers are willing to give up around a quarter of their daily wage for a job guarantee. And direct survey questions corroborate this, with informal, young and female workers being most likely to want a job guarantee, and to want it even more due to the current crisis.

This paper presents new evidence on international trade and worker outcomes. It examines a big world event that produced an unprecedentedly large shock to the UK exchange rate. In the 24 hours in June 2016 during which the UK electorate unexpectedly voted to leave the European Union, the value of sterling plummeted. It recorded the biggest depreciation that has occurred in any of the world’s four major currencies since the collapse of Bretton Woods. Exploiting this variation, the paper studies the impact of trade on wages and worker training. Wages and training fell for workers employed in sectors where the intermediate import price rose by more as a consequence of the sterling depreciation. Calibrating the estimated wage elasticity with respect to intermediate import prices to theory uncovers evidence of a production complementarity between workers and intermediate imports. This provides new direct evidence that, in the modern world of global value chains, it is changes in the cost of intermediate imports that act as a driver of the impact of globalization on worker welfare. The episode studied and the findings add to widely expressed, growing concerns about poor productivity performance relating to skills and to patterns of real wage stagnation that are plaguing contemporary labour markets.

Resource based theories propose that firms grow by diversifying into products which use common capabilities. We provide evidence for common input capabilities using a policy that removed entry barriers in input markets to show that the similarity of a firm's and industry's input mix determine firm production choices. We model industry choice and economies of scope from input capabilities. Estimating the model for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of co-production rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.

Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Theories propose that multiproduct firms grow by diversifying into products which need the same know-how or capabilities, but are less clear on what these capabilities are. Input output tables show firms co-produce in industries that share intermediate inputs, suggesting input capabilities drive multiproduct production patterns. We provide evidence for this in Indian manufacturing: the similarity of a firm’s input mix to an industry’s input mix predicts entry into that industry. We identify the direction of causality from the removal of size-based entry barriers in input markets which made firms more likely to enter industries that were similar in input use to their initial input mix. We rationalize this finding with a model of industry choice and economies of scope to estimate the importance of input capabilities in determining comparative advantage. Complementarities driven by input capabilities make a firm on average 5% (and up to 15%) more likely to produce in an industry. Entry barriers in input markets constrained the comparative advantage of firms and were equivalent to a 10.5 percentage point tariff on inputs.

This paper presents new evidence on international trade and worker outcomes. It examines a big world event that produced an unprecedentedly large shock to the UK exchange rate. In the 24 hours in June 2016 during which the UK electorate unexpectedly voted to leave the European Union, the value of sterling plummeted. It recorded the biggest depreciation that has occurred in any of the world's four major currencies since the collapse of Bretton Woods. Exploiting this variation, the paper studies the impact of trade on wages and worker training. Wages and training fell for workers employed in sectors where the intermediate import price rose by more as a consequence of the sterling depreciation. Calibrating the estimated wage elasticity with respect to intermediate import prices to theory uncovers evidence of a production complementarity between workers and intermediate imports. This provides new direct evidence that, in the modern world of global value chains, it is changes in the cost of intermediate imports that act as a driver of the impact of globalization on worker welfare. The episode studied and the findings add to widely expressed, growing concerns about poor productivity performance relating to skills and to patterns of real wage stagnation that are plaguing contemporary labour markets.

© The Author(s) 2018. Published by Oxford University Press on behalf of European Economic Association. All rights reserved. This paper estimates the consumer welfare impact of the new generation of trade agreements implemented by the European Union between 1993 and 2013. We decompose the overall effect into contributions of changes in prices, quality and variety. Estimating trade elasticities for narrow product categories of EU imports, we infer quality from data on imported values and volumes. For the EU as a whole, we find that trade agreements increased quality by 7% on average but did not affect prices or variety. This translates into a cumulative reduction in the consumer price index of 0.24% over our sample period. We also find a high degree of impact heterogeneity across EU countries, trading partners, and the type of trade agreement, with high-income EU countries seeing much stronger quality increases and larger overall consumer benefits.

The vast majority of world trade flows is between firms. Only recently has research in international trade started to emphasize the importance of the connections between exporters and importers both in aggregate trade flows and in the negative relationship between trade and geographic distance. This chapter documents the role of firm-to-firm connections in trade flows and the formation and duration of these importer-exporter relationships. Using customs data from Colombia for 1995-2014, we are able to identify both the Colombian importing firm and the foreign exporter in every Colombian import and export transaction. We document both the nature of these bilateral trading relationships and their evolution over time.

There is a growing recognition that for developed economies, like the UK, tariff-free market access is just one of a number of measures that ease cross-border trade flows. Modern trade agreements go beyond tariff reductions by setting rules, such as market access and regulation of foreign service providers. We examine the contribution of deep non-tariff provisions on international trade in goods and services. Using a gravity model, we find that provisions related to services, investment, and competition make up half of the overall impact of economic integration agreements on trade flows. These deep provisions have larger effects for trade in services than for trade in goods, and their relative contribution is highest in sectors that facilitate supply chain activity, such as transportation and storage. We apply our sectoral estimates of deep provisions to examine two counterfactuals of the UK signing bilateral deals with the US and with China and India. We find that negotiating services, investment, and competition provisions in these future deals would boost trade relatively more in professional, scientific, and technical activities in the UK.

This paper estimates the consumer welfare impact of the new generation of trade agreements implemented by the European Union between 1993 and 2013. We decompose the overall effect into contributions of changes in prices, quality and variety. Estimating trade elasticities for narrow product categories of EU imports, we infer quality from data on imported values and volumes. For the EU as a whole, we find that trade agreements increased quality by 7% on average but did not affect prices or variety. This translates into a cumulative reduction in the consumer price index of 0.24% over our sample period. We also find a high degree of impact heterogeneity across EU countries, trading partners and the type of trade agreement, with high-income EU countries seeing much stronger quality increases and larger overall consumer benefits.

The presence of global value chains challenges the neoclassical idea of the firm since it implies firms are not monolithic but are rather interdependent on the larger economic environment. Examining establishments, the smallest units of production within firms, sheds light on the microeconomic incentives determining the location of production and whether a firm produces a good or sources it. Most work on multiproduct firms looks at developed countries, but constraints on firm growth are greater in developing economies. We examine multiproduct establishments in India during a high growth period. Multiproduct establishments made up the bulk of manufacturing production, and their product turnover contributed 28 per cent to net sales growth. Unlike the nineties which witnessed drastic liberalization, establishments in the two-thousands dropped products at rates similar to those for the US. Sales dispersion across products also predicts product addition

Empirical work has drawn attention to the high degree of productivity differences within industries, and its role in resource allocation. In a benchmark monopolistically competitive economy, productivity differences introduce two new margins for allocational inefficiency. When markups vary across firms, laissez faire markets do not select the right distribution of firms and the marketdetermined quantities are inefficient. We show that these considerations determine when increased competition from market expansion takes the economy closer to the socially efficient allocation of resources. As market size grow large, differences in market power across firms converge and the market allocation approaches the efficient allocation of an economy with constant markups

Leaving the EU will change the UK’s economic relations with the rest of the world. This paper discusses the UK’s role in the global economy and the consequences of Brexit for the UK’s trade, investment and living standards. We emphasize that international integration encompasses investment and labour services flows as well as trade in goods and services and that there are important interdependencies between the different forms of integration which should be considered when evaluating policy changes. Brexit is likely to make the UK poorer by reducing trade and investment flows, but the size of these effects will depend upon the nature of the UK’s post-Brexit economic relations with the EU and the rest of the world. We conclude by considering options for UK-EU relations after Brexit and how the UK should approach future trade negotiations.

This paper estimates the welfare effects of Brexit, focusing on trade and fiscal transfers. We use a standard quantitative general equilibrium trade model with many countries and sectors and trade in intermediates, as in Costinot and Rodríguez-Clare (2014). We simulate a range of counterfactuals reflecting alternative options for EU-UK relations following Brexit. Welfare losses for the average UK household are 1.3% if the UK remains in the EU's Single Market like Norway (a “soft Brexit”).Losses rise to 2.7% if the UK trades with the EU under World Trade Organization rules (a “hard Brexit”). A reduced form approach that captures the dynamic effects of Brexit on productivity more than riples these losses and implies a decline in average income per capita of between 6.3% and 9.4%, partly via falls in foreign investment. These negative effects are widely shared across the entire income distribution and are unlikely to be offset from new trade deals.

The economic consequences of leaving the EU will depend on what policies the UK adopts following Brexit. But lower trade due to reduced integration with EU countries is likely to cost the UK economy far more than is gained from lower contributions to the EU budget.

Over the past two decades, the European Commission has negotiated a number of Free Trade Agreements (FTAs) which contain both traditional elements of bilateral tariff reductions, as well as additional liberalisation measures like non-tariff barriers. According to economic theory, FTAs lower trade barriers on imported goods, leading to consumer welfare gains from increase in product variety, better quality products and lower prices for existing products. We estimate the variety, quality and price effects of EU FTAs, drawing on recent developments in the quality literature and using detailed import price and expenditure data. On average, trade agreements the EU has entered into over the past two decades increased the quality of UK imports from its FTA partners by 26 per cent and lowered the quality-adjusted price of imports by 19 per cent. We find that consumer prices fell by 0.5 per cent for UK consumers as a result of FTAs with trade partners that are not members of the European Community. Price reductions for UK consumers are greater than those for EU12 consumers, whose prices fell by 0.3 per cent from non-EC FTAs. Using the set of non-EC FTA estimates to predict the effects of future FTAs, we find a projected decline in consumer prices for UK consumers of 0.4 per cent from an FTA with the United States (TTIP) and 0.2 per cent an FTA with Japan (EPA). For EU12 consumers, the TTIP and EPA are predicted to reduce consumer prices by 0.3 per cent and 0.1 per cent.

Suppose the UK votes to leave the European Union (EU): what happens next? This report outlines some of the options for the UK outside the EU and discusses the costs and benefits of each alternative.

Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Firms continually adapt their product mix, but what determines which products firms expand into? Theories of the firm propose that mulitproduct firms choose to make products which need the same know-how or inputs that can't be bought ‘off the shelf’. We empirically examine this rationale by testing for firm-level capabilities that are shared across products and manifested through input-output (IO) linkages. We show that a firm's idiosyncratic horizontal and vertical similarity to a product's IO structure predicts product adoption. Using product-specific policy changes for a firm's inputs and outputs, we show that input linkages are the most important, suggesting that firms' product capabilities depend more on economies of scope rather than product market complementarities.

This paper examines the microstructure of import markets and the division of the gains from trade among consumers, importers and exporters. When exporters and importers transact through anonymous markets, double marginalization and business stealing among competing importers lead to lower profits. Trading parties can overcome these inefficiencies by investing in richer contractual arrangements such as bilateral contracts that eliminate double marginalization and joint contracts that also internalize business stealing. Introducing these contractual choices into a trade model with heterogeneous exporters and importers, we show that trade liberalization increases the incentive to engage in joint contracts, thus raising the profits of exporters and importers at the expense of consumer welfare. We examine the implications of the model for prices, quantities and exporter-importer matches in Colombian import markets before and after the US-Colombia free trade agreement. US exporters that started to enjoy dutyfree access were more likely to increase their average price, decrease their quantity exported and reduce the number of import partners.

Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large countries, I show the optimal tariff is a sum of the median voter component and a positive in terms of trade component. Positive terms of trade effects raise tariffs in all countries, and can overcome the negative median voter component in labor-abundant countries. Testing the tariff prediction with cross-section and panel data from the 1990s, I show the median voter component is negative in labor-abundant countries and positive in capital-abundant countries. As expected, terms of trade effects raise tariffs across all countries and are stronger among non-members of the WTO.

A fundamental question in monopolistic competition theory is whether the market allocates resources efficiently. This paper generalizes the Spence-Dixit-Stiglitz framework to heterogeneous firms, addressing when the market provides optimal quantities, variety and productivity. Under constant elasticity of demand, each firm prices above its average cost, yet we show market allocations are efficient. When demand elasticities vary, market allocations are not efficient and reflect the distortions of imperfect competition. After determining the nature of market distortions, we investigate how integration may serve as a remedy to imperfect competition. Both market distortions and the impact of integration depend on two demand side elasticities, and we suggest richer demand structures to pin down these elasticities. We also show that integration eliminates distortions, provided the post-integration market is sufficiently large.