Search

This paper estimates how Brexit has affected goods trade between the United Kingdom and European Union. Using product-level trade flows between the EU and all other countries in the world as a comparison group, we find a sharp decline in trade from the UK to the EU and significant but smaller reductions in trade from the EU to the UK. However, when we estimate the size of the Brexit impact on trade using UK data and UK global trade as a benchmark, we find strikingly different results. We identify two key sources of this discrepancy. First, the UK's global exports grew relatively slowly. We argue these are not suitable as a no-Brexit counterfactual. Second, Brexit also led to breaks in the measurement of trade flows, particularly for the EU data. To resolve these issues, we combine UK-reported data for its trade with EU and EU data for its trade with the rest of the world to use as the appropriate benchmark for comparison. This generates an estimate that Brexit reduced trade by close to 20% in both directions.

This paper models the immediate impact of the COVID-19 pandemic on Irish SMEs and extrapolates forward their performance as restrictions ease. Our baseline scenario shows a steady recovery path for the median firm. However, indicators of financial difficulties remain persistently high with the share of highly distressed firms reaching twenty-one per cent in 2024 in scenarios without firm exit. With exit of the most financially distressed firms, the patterns of financial characteristics return to 2019 levels by 2023. We also model the impact of the policy supports available to firms. In the absence of government supports, the distress rate would have been seventy-two per cent higher during the pandemic. We find that supports have a persistent impact even after they expire. In 2024, the distressed rate without the supports would be twenty per cent higher than in the baseline scenario with supports.

This paper maps out the trade relationship in goods between the two largest trading blocs in the global economy - the EU and US. We use detailed product category information to provide an in-depth description of current trade flows between the two markets, with a particular focus on how Irish-US trade patterns compare to those of the EU overall. Along with the overall size of the trade flows, we highlight the extent of diversification in terms of the number of products particularly dependant on the US market. We then examine the structure of current bilateral tariff rates and how these vary across product types. This is done at the most granular level possible, using the product level trade flows compiled by the United Nations and matching them to current tariff levels. This structure is then used to assess potential changes proposed to these tariffs, using the US June 2020 tariff announcement and EU retaliation as illustrations.

In this paper, we explore the link between SME investment, firm economic characteristics, and the presence of financing constraints during the post-2008 crisis recovery period in Ireland. We use novel survey data between 2016 and 2018, which disaggregates investment by asset type and allows a granular assessment typically not present in the existing literature. Our approach links investment to the marginal product of capital using a stochastic frontier model to explore, and measure, the presence of constraints. We also test whether liquid assets, indebtedness and investment dissatisfaction impact SMEs investment. We find a clear link between investment and its marginal product with elasticities of between 0.55 and 0.65; a one per cent increase in marginal product leads to a 0.55-0.65 per cent increase in investment. The investment efficiency estimates obtained show the presence of financing constraints. We find evidence of both internal and external finance constraints explaining the investment efficiency of small fixed assets. Higher collateral availability contributes to im-prove investment efficiency for all fixed assets.

In this paper, we use new survey data on the Irish SME population to trace out the impact of the pandemic on firms' revenues, their capacity to adjust their cost base and their usage of policy supports. Between March and October 2020 over 70 per cent of firms experienced some fall in turnover with a median fall of 25 per cent compared to 2019. The impact of the shock appears uncorrelated with past firm performance which highlights its exogenous nature. Expenditure fell by 8.5 per cent on average with 40 per cent of firms cutting spending. Losses were incurred in over 30 per cent of enterprises with a further 30 per cent just breaking even. We find that about 61 per cent of SMEs received wage subsidies, 20 per cent of firms used tax warehousing while fewer than 6 per cent of firms used lending initiatives. Policy support take-up is more likely among those more affected by the downturn, while the smallest firms appear less likely to use support than larger firms.

In this paper, we use a novel survey module to consider investment in health-related expenditures by SMEs following the onset of the COVID-19 pandemic in Ireland. Using a unique dataset designed to capture expenditure on public health measures, we explore the heterogeneity in expenditure across firms and explore its determinants using traditional models. We find that 86 per cent of SMEs invested in health measures with a mean investment of =C15,500 and a median of =C3,500. Nearly all investment was financed by internal funds. Health investments are uncorrelated with economic performance and financial factors, in contrast to traditional models of investments. This highlights the random nature of the COVID-19 shock.

This report examines the extent of cross-border trade in services on the island of Ireland and the characteristics of the firms participating in this trade. Although services make up a substantial and growing portion of economic activities in both Ireland and Northern Ireland, data limitations have resulted in less focus being placed on services flows when compared to goods trade. Given the strong links established between exporting and economic growth, an understanding of the structure and composition of trade is necessary to provide evidence for a supportive policy environment for firms and to enhance further all Island economic links. A key contribution of the report is a stocktake of the various data sources available on cross-border services trade. This draws attention to some of the differences in data collected in Ireland and Northern Ireland and where there are data gaps that could be addressed in the future. Given the differences in data sources, some caveats are made throughout the report on direct comparisons and a recommendation is made for the benefits of collection of more systematically comparable data on an all-island basis.

This paper examines the early months of post-Brexit trade flows in goods between Ireland and the United Kingdom. Controlling for product-level time effects across all global trade partners, we isolate the contribution of Brexit to trade in the first eight months of 2021 from other potential common drivers of trade flows including the COVID-19 pandemic. The estimated direct impact of Brexit is highly asymmetric, reducing imports from the UK to Ireland substantially but without any statistically significant impact on exports. This is likely due to the gradual implementation of customs procedures by the UK, with a range of checks to be introduced in 2022. We decompose the Irish-UK trade flows into trade with Northern Ireland separately from Great Britain. This shows that all of the decline in trade is driven by Great Britain with the majority of the reduction attributable to Brexit. In contrast, trade between Ireland and Northern Ireland trade has increased considerably.

This paper examines the early months of trade in goods between the United Kingdom and European Union in the aftermath of Brexit. Controlling for product-time and partner country effects across all European bilateral trade flows, we isolate the contribution of Brexit on trade in the first half of 2021 from other potential common drivers of trade flows including the COVID-19 pandemic. The results show sharp declines in trade from the UK to the EU, the majority of which can be attributed to a Brexit impact. We also document considerable variation across member states and sectors. The effect of Brexit is highly asymmetric, however, with reduction in trade from the EU to the UK approximately half the size of the fall from the UK to EU. This is likely explained by the more gradual implementation of customs checks by the UK. Reductions in trade are identified from the date of the referendum and no evidence of stockpiling in the months prior to Brexit is found on either side.

The stability of the labour share of income is a fundamental feature of macroeconomic models, with broad implications for the shape of the production function, inequality, and macroeconomic dynamics. However, empirically, this share has been slowly declining in many countries for several decades, though its causes are subject of much debate. This paper analyses the drivers of labour share developments in Europe at a sectoral level. We begin with a simple shift-share analysis which demonstrates that the decline across countries has been primarily driven by changes within industries. We then use aggregated microdata from CompNet to analyse drivers of sector-level labour shares and to decompose their effects into shifts in the sector average or reallocation of resources between firms. Our main findings are that the advance of globalisation and the widening productivity gap between "the best and the rest" have negative implications for the labour share. We also find that most of the changes are due to reallocation within sectors providing support for the "superstar firms" hypothesis. The finding that globalisation has had a negative impact on the labour share is of relevance for policy in the context of the current backlash against globalisation and reinforces the need to ensure benefits of globalisation and productivity are passed on to workers.

Ireland is currently dealing with a severe public health crisis from Covid-19, which has substantially reduced social and economic activity. Prior to the onset of the pandemic, the most imminent risk to the strong performance of the Irish economy seemed likely to come from a hard Brexit. This paper looks at sectoral exposure to both the Covid-19 and Brexit shocks to assess if there is a risk that the impact of a hard Brexit on an economy weakened by dealing with Covid-19 could make the previously estimated effects of Brexit worse. Using a range of data sources, we assign an exposure rank to 57 sectors of the economy for each shock, from most severely affected sectors to those that are effectively unaffected. Overall, we find that there is limited overlap in the sectors exposed to the different shocks. We further examine the flow of goods and services between sectors affected by the two shocks to establish the extent of potential supply chain transmission of the shocks. Our main finding is that the sectors exposed to each shock are not particularly closely connected to those affected by the other shock. These results suggest that adding the Brexit shock to that of Covid-19 brings a wider range of sectors exposed to risk but that the impacts are not magnified by interaction effects.

Previous research has generally shown that increased export experience has a positive impact on the subsequent survival of newly launched export relationships of a firm. In this paper, we find that there are important differences in the effects of firm experience on export survival depending on the source of the experience. Specifically, experience built up by a firm from previously exporting a particular product before launching it in a new market has a strong positive impact on the survival of a new product-market relationship. In contrast, experience within a market prior to adding a new product has a mainly negative effect on the survival probability of the additional product. This shows that taking a successful product to new markets is more likely to succeed than expanding product range within a market.

In this paper we present new empirical evidence on the relationship between exporting experience and the duration of export relationships at the firm-product-destination level. Our starting hypothesis that more experienced exporters would have longer lived productmarket trade relationships is quite strongly rejected in baseline specifications. However, we find that when we introduce interaction effects between experience and product scope and also between experience and similarity to the firm's core export product, our results change considerably. These findings suggest that at some level of experience as an exporter there is a decline in the marginal return on the positive effects on survival of product diversification and proximity. We suggest that this is evidence that more experienced firms launch product-destination pairs further away from their core competence and/or into more risky markets which therefore increases the risk of failure of any individual product-destination pairing.

The UK exit from the European Union (Brexit) is likely to have a range of impacts, with trade flows one of the most immediate areas where the effects will become evident. One possible outcome of Brexit is a situation where WTO tariffs apply to merchandise trade between the UK and the EU. By examining detailed trade flows between the UK and all other EU members, matching over 5200 products to the WTO tariff applicable to external EU trade this paper shows that such an outcome would result in significantly different impacts across countries. Our estimates of exposure at the country level show an extremely wide range with reductions in trade to the UK falling by 5% (Finland) to 43% (Bulgaria) taking into account the new tariffs and the elasticity of the trade response to this price increase. Food and textiles trade are the hardest hit, with trade in these sectors reducing by up to 90%.

While differences in capital structure between large and small firms have been extensively researched, relatively less empirical evidence is available explaining cross country differences in the capital structure of SMEs over the life cycle. This is an important gap as many of the theoretical predictions on financing requirements and access can be linked to firm age. In this paper, we explore the determinants of SME capital structure across the age distribution of firms using firm-level panel data for 15 European countries. Our key findings demonstrate the existence of a non-linear relationship between age and capital structure that differs markedly across countries. We also find that firm level collateral and liquidity play a role in determining the age-debt relationship. Finally, we find that the age-debt relationship depends on the country level financial structure with more stock market financing reducing firm leverage disproportionately for young firms while foreign bank lending and bank concentration both increase firm leverage across the lifecycle.

We examine the relationship between exporting experience and the duration of firm export product flows. We find that more experienced firms (in years of exporting) show a higher probability of failure associated with the introduction of new products. On the other hand, firms with broader export scope are more likely to have better survival times for newly launched products. Although apparently counter-intuitive, we show that this finding is consistent with models of multi-product firms in which firms begin exporting by launching the products closest to their core competency and gradually expand their range of products by exporting those that are further away from their core, resulting in lower survival probability for later products. Validating this interpretation, we show that the distance of the new products to the core competency of the firm plays an important role in determining the survival of new products.