Global Effects of the Brexit Referendum: Evidence from US Corporations

Murillo Campello, Gustavo S. Cortes, Fabricio d'Almeida, Gaurav Kankanhalli

NBER Working Paper No. 26714
Issued in January 2020
NBER Program(s):Asset Pricing Program, Corporate Finance Program, Economic Fluctuations and Growth Program, International Finance and Macroeconomics Program, International Trade and Investment Program

We show that the 2016 Brexit Referendum led American corporations to cut jobs and investment within US borders. Using establishment-level data, we document that these effects were modulated by the degree of reversibility of capital and labor. American job losses were particularly pronounced in industries with less skilled and more unionized workers. UK-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Data on the near-universe of US establishments also point to measurable, negative effects on establishment turnover (openings and closings). Our results demonstrate how foreign-born political uncertainty is transmitted across international borders, shaping domestic capital formation and labor allocation.

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Document Object Identifier (DOI): 10.3386/w26714