Internat. Economic Integration (2)

Internat. Economic Integration (2)

1. Sampson (2017); three approaches to estimate the effects of Brexit

   • Historical case studies of the econ. consequences of joining the EU
     • dif-in-dif of entering EU with synthetic control group
       • advant: actual historical data
         • disadva:'parallel trends' assumption difficult, plus leaving not same as joining
           • Result: Joining the EU made UK 8.6% GDP richer
   • Computational general equilibrium trade models
     • ex. simulate Brexit as an increase in tariff and non-tariff barriers; depends on parameters
       • advant: accounts for general equilibrium effects
         • disad: 1. no consideration of FDI, immigration 2. nontariff barriers hard to quantify 3. results depend of elasticity of trade to trade costs
           • Result: Dhingra est. 1.3% decline
   • Reduced-form evidence based on estimates of how EU membership affects trade
     • Step 1: How much will Brexit decrease trade? 2. Translate trade decrease in GDP decrease
       • advan: 1. does not rely on validity of any trade mode 2. captures channels that models do not ex. technology diffusion, productovity
         • dis: 1. causal relationship
           • Result: Feyrer's est. of 9.4%