Global Effects of the Brexit Referendum: Evidence from US Corporations
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.
We are grateful to Warren Bailey, Craig Brown, Danilo Cascaldi-Garcia, Steven Davis, Janet Gao, Jesus Gorrin, John Graham, Darien Huang, Tim Johnson, Hyunseob Kim, Mauricio Larrain, Angie Low, Diogo Palhares, Minchul Shin, Felipe Silva, Allan Timmermann, and seminar participants at the Bank of Portugal, Bristol Workshop on Banking, Cambridge University, George Washington University, KU Leuven, LUBRAFIN Conference, Manchester Business School, National Bank of Belgium, Penn State, SFS Cavalcade, Syracuse University, University of Connecticut, University of Georgia, University of Illinois, University of Kentucky, Warwick Business School, and Washington University St. Louis for many useful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.