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 triples 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.

A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for Brazil, we find that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages between 2000 and 2010. However, we observe faster wage growth in locations benefiting from rising Chinese commodity demand during the same period.

UK GDP per worker fell by almost 4% in the five years following Lehman's collapse in 2008, something unprecedented in post‐war history. A possible reason for poor productivity is low growth in the effective capital–labour ratio. This is likely to have occurred because there has been a fall in real wages and increases in the cost of capital due to the financial crisis. We simulate various changes in the capital–labour ratio and after accounting for these changes, the evolution of total factor productivity appears much more similar to earlier severe recessions and likely to be related to underutilised resources.

A recent boom in commodities-for-manufactures trade between China and other developing countries has led to much concern about the losers from rising import competition in manufacturing, but little attention on the winners from growing Chinese demand for commodities. Using census data for Brazil, we find that local labour markets more affected by Chinese import competition experienced slower growth in manufacturing wages and in-migration rates between 2000 and 2010, and greater rises in local wage inequality. However, in locations benefiting from rising Chinese demand, we observe higher wage growth, lower takeup of cash transfers and positive effects on job quality.