Working Paper: NBER ID: w26714
Authors: Murillo Campello; Gustavo S. Cortes; Fabricio Dalmeida; Gaurav Kankanhalli
Abstract: We show that the 2016 Brexit Referendum had multi-faceted consequences for corporate America, shaping employment, investment, divestitures, R&D, and savings. The unexpected vote outcome led US firms to cut jobs and investment within US borders. Using establishment-level data, we document that these effects were modulated by the reversibility of capital and labor. American-based job destruction was 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.
Keywords: Brexit; Political Uncertainty; Corporate Investment; Employment; R&D
JEL Codes: F23; G15; G31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Brexit vote (F69) | reduction in employment among UK-exposed firms (J65) |
| Brexit vote (F69) | reduction in investment among UK-exposed firms (F23) |
| Brexit vote (F69) | slowdown in net job creation among UK-exposed firms (J23) |
| Brexit vote (F69) | increase in R&D spending among UK-exposed firms (O39) |
| Brexit vote (F69) | changes in corporate behavior among U.S. firms (L20) |