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Global Competition and Brexit

  • ITALO COLANTONE (a1) and PIERO STANIG (a1)
Abstract

We show that support for the Leave option in the Brexit referendum was systematically higher in regions hit harder by economic globalization. We focus on the shock of surging imports from China over the past three decades as a structural driver of divergence in economic performance across U.K. regions. An IV approach supports a causal interpretation of our finding. We claim that the effect is driven by the displacement determined by globalization in the absence of effective compensation of its losers. Neither overall stocks nor inflows of immigrants in a region are associated with higher support for the Leave option. A positive association only emerges when focusing on immigrants from EU accession countries. The analysis of individual data suggests that voters respond to the import shock in a sociotropic way, as individuals tend to react to the general economic situation of their region, regardless of their specific condition.

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Corresponding author
Italo Colantone is an Assistant Professor of Economics, Department of Policy Analysis and Public Management and Baffi-Carefin Research Centre. Address: Bocconi University, Via Roentgen 1, 20136, Milan, Italy (italo.colantone@unibocconi.it).
Piero Stanig is an Assistant Professor of Political Science, Department of Policy Analysis and Public Management and Dondena Research Centre. Address: Bocconi University, Via Roentgen 1, 20136, Milan, Italy (piero.stanig@unibocconi.it).
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We thank Laura Brogi, Matteo Greco, and Giorgio Pietrabissa for excellent research assistance. We thank Tommaso Aquilante, Guido Tabellini, Maurizio Zanardi, seminar participants at the Royal Economic Society Conference in Bristol, the editor, Ken Benoit, and three anonymous referees for helpful comments. The usual disclaimer applies.

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