Estimating the trade and welfare effects of Brexit: A panel data structural gravity model

Oberhofer, Harald; Pfaffermayr, Michael

doi:10.1111/caje.12494

Cited by 31 publications

(32 citation statements)

References 39 publications

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“…However, as discussed by Head and Mayer (2014) and confirmed in Monte Carlo simulations by Sellner (2019), identification of the effects of non‐discriminatory (i.e., time‐varying but bilaterally invariant) trade policy variables without information on domestic trade flows leads to biased estimates. We address this shortcoming by using the panel dataset of Oberhofer and Pfaffermayr (2020) that covers domestic and international trade flows for 63 countries between 2006 and 2012. This allows to identify the effect of unilateral trade policies and costs relative to almost frictionless domestic shipments.…”

Section: Literature On the Costs Of Time To Tradementioning

confidence: 99%

“…We estimate Equation (1) via CPPML developed in Pfaffermayr (2020a) and recently applied in Oberhofer and Pfaffermayr (2020) for the estimation of the trade and welfare effects of Brexit. Compared to the established dummy variable PPML estimator, the CPPML has three advantages: (a) it allows to obtain reliable confidence bands for the counterfactual predictions, (b) these predictions are always theory‐consistent (obey restrictions) even with data missing at random, and (c) the estimated variances of the structural parameters are not asymptotically downward biased, since CPPML avoids the estimation of a large number of exporter‐time and importer‐time dummies.…”

Section: Empirical Modelmentioning

confidence: 99%

“…Compared to the established dummy variable PPML estimator, the CPPML has three advantages: (a) it allows to obtain reliable confidence bands for the counterfactual predictions, (b) these predictions are always theory‐consistent (obey restrictions) even with data missing at random, and (c) the estimated variances of the structural parameters are not asymptotically downward biased, since CPPML avoids the estimation of a large number of exporter‐time and importer‐time dummies. As in Oberhofer and Pfaffermayr (2020), a zig‐zag algorithm is implemented to partial out the bilateral fixed effects. Moreover, Weidner and Zylkin (2019) illustrated a downward bias of the structural trade costs parameters in three‐way panels estimated by PPML.…”

Section: Empirical Modelmentioning

confidence: 99%

“…This paper addresses the question how time spent on border procedures impacts trade and welfare. We estimate a structural gravity model augmented by the time spent on border‐crossing procedures on trade, using a rich panel dataset provided by Oberhofer and Pfaffermayr (2020) and the measures on time to export and import from the World Banks Doing Business Indicators. Utilizing the estimates and exploiting the structure of the model, we simulate three counterfactual scenarios to quantify the effects of unilateral trade facilitation efforts.…”

Section: Introductionmentioning

confidence: 99%

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Revisiting time as a trade barrier: Evidence from a panel structural gravity model

Oberhofer

Pfaffermayr

Sellner

2021

Rev International Economics

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In this paper we revisit the evidence on the effects of time spent on border-crossing procedures for international trade using a theory-consistent structural gravity model. We exploit a rich panel data set including domestic trade flows and employ a recent econometric estimator that exhibits favorable asymptotic properties. The results indicate a significant negative effect of the time required for border procedures that is driven by the time needed for document preparation. We find that an additional day spent on those procedures corresponds to an ad valorem tariff equivalent of 0.82 percentage points. The parameters of our structural model are used to simulate three counterfactual scenarios, quantifying the effect of past and potential future trade facilitation efforts for middle, low and high income countries. Full endowment general equilibrium effects suggest that lower and middle income countries benefit most in all scenarios in terms of trade and welfare. In times of stagnating multilateral and bilateral trade liberalization efforts, unilateral implementation of trade facilitation carries the potential to induce an alternative stimulus for trade and welfare, especially for low and middle income countries.

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Section: Literature On the Costs Of Time To Tradementioning

confidence: 99%

Section: Empirical Modelmentioning

confidence: 99%

Section: Empirical Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Revisiting time as a trade barrier: Evidence from a panel structural gravity model

Oberhofer

Pfaffermayr

Sellner

2021

Rev International Economics

Self Cite

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“…Baier and Welfens (2018) examine, using the gravity model, the impact of Brexit on FDI flows and estimate a decline of FDI inflows to the UK by about 42%. Using a panel data structural gravity approach, and assuming different counterfactual post-Brexit scenarios, Oberhofer and Pfaffermayr (2018) find that six years after Brexit occurs, the UK's (EU's) exports of goods to the EU (UK) are likely to decline by between 7.2% and 45.7% (or 5.9% and 38.2%). They also find that the UK's real income is likely to decline by between 1.4% and 5.7% under a hard Brexit scenario and that welfare effects for the EU are insignificant.…”

Section: Introductionmentioning

confidence: 99%

Quo Vadis, Britain? – Implications of the Brexit process on the UK’s real economy

Celebi

2021

Int Econ Econ Policy

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Using the Panel Data Approach (PDA) of Hsiao et al. (2012) in combination with the LASSO method, this article aims to measure the effect of the Brexit process on the United Kingdom's real economy up to 2019Q2. The results are twofold: Firstly, compared to the existing literature, the PDA improves the measurement of the impact of Brexit on the real economy regarding computation intensity, the feasibility of statistical inference and a wider application area. Secondly, the estimated counterfactuals for the UK show that the Brexit process has played a crucial role in the UK's economy, leading to lower GDP (growth rates), lower private consumption, lower gross fixed capital formation (GFCF) and higher exports. On average, GDP growth has declined between 1.3 and 1.4 percentage points, whereby the cumulative loss ranges between 48 and 54 billion British pounds. Moreover, private consumption in the UK has declined 4.7 billion British pounds quarterly on average. The predicted counterfactuals show that the impact of the Brexit process on GFCF has begun in 2018Q1, whereby the average treatment effect amounts to -2.9 billion British pounds. The UK's exports increased since the referendum, most likely due to the depreciation of the British pound post-Brexit. The average quarterly effect of the Brexit process on exports is estimated here at 4.8 billion British pounds. Zusammenfassung:Unter Verwendung des Panel Data Approach (PDA) von Hsiao et al. (2012) in Kombination mit der LASSO-Methode zielt dieser Artikel darauf ab, die Auswirkungen des Brexit-Prozesses auf die Realwirtschaft des Vereinigten Königreichs bis 2019Q2 zu messen. Die Ergebnisse liefern zwei Erkenntnisse: Erstens verbessert der PDA im Vergleich zur bestehenden Literatur die Messung der Auswirkungen des Brexit auf die Realwirtschaft hinsichtlich der Rechenintensität, der Anwendbarkeit statistischer Inferenz und des breiteren Anwendungsbereichs. Zweitens zeigen die kontrafaktischen Schätzungen für das Vereinigte Königreich, dass der Brexit-Prozess eine entscheidende Rolle in der britischen Wirtschaft gespielt hat, was zu einem niedrigeren BIP (-Wachstum), einem geringeren privaten Konsum, geringeren Bruttoanlageinvestitionen und höheren Exporten geführt hat. Im Durchschnitt ist das BIP-Wachstum zwischen 1,3 und 1,4 Prozentpunkten zurückgegangen, wobei der kumulierte Verlust zwischen 48 und 54 Milliarden Britischen Pfund liegt. Darüber hinaus ist der private Konsum im Vereinigten Königreich durchschnittlich um 4,7 Milliarden Britische Pfund pro Quartal zurückgegangen. Die kontrafaktischen Schätzungen zeigen, dass die Auswirkungen des Brexit-Prozesses auf die Bruttoanlageinvestitionen im ersten Quartal des Jahres 2018 begonnen haben, wobei der durchschnittliche Effekt bei -2,9 Milliarden Britischen Pfund liegt. Die Exporte Großbritanniens haben seit dem Referendum zugenommen, was höchstwahrscheinlich auf die Abwertung des britischen Pfunds nach dem Brexit-Prozess zurückzuführen ist. Der durchschnittliche Effekt des Brexit-Prozesses auf die Exporte wird hierbei au...

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Internationale Handelspolitik

Dür,

Oberhofer

2023

Springer Reference Sozialwissenschaften

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Estimating the trade and welfare effects of Brexit: A panel data structural gravity model

Cited by 31 publications

References 39 publications

Revisiting time as a trade barrier: Evidence from a panel structural gravity model

Revisiting time as a trade barrier: Evidence from a panel structural gravity model

Quo Vadis, Britain? – Implications of the Brexit process on the UK’s real economy

Internationale Handelspolitik

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