This paper proposes a new panel data structural gravity approach for estimating the trade and welfare effects of Brexit. Assuming
different counterfactual post-Brexit scenarios, our main findings suggest that the UK's exports of goods to the EU are likely
to decline within a range between 7.2 percent and 45.7 percent six years after Brexit has taken place. For the UK, the negative
trade effects are only partially offset by an increase in domestic trade and trade with third countries, inducing a decline
in the UK's real income of between 0.3 percent and 5.7 percent. The estimated welfare effects for the EU are not different
from zero, but some members like Ireland are expected to also experience welfare losses.
Research group:Industrial, Innovation and International Economics