Policy makers, pundits, and investors have spent several months anxiously monitoring the vital signs of the British and European economies, trying to divine the ramifications of the UK’s potential departure from the European Union. Stock prices have largely recovered, while the pound remains low. Some analysts have raised their predictions for the UK’s short-term economic growth but lowered expectations for long-term growth. Meanwhile, the date and terms of the departure remain in doubt. Nonetheless, European economists find room for broad agreement on at least one aspect of Brexit: its likely effect on incomes in the UK.
Chicago Booth’s Initiative on Global Markets has assembled a panel of European economic experts, consisting of 50 economists from 27 major universities and business schools. And in one of the panel’s inaugural polls, 80 percent of respondents agree that the Brexit decision will in 10 years leave real per-capita incomes in the UK lower than they otherwise would have been. Brexit was one of six initial topics the IGM asked its European experts about for the new panel, which launched this week.
The European economists polled expressed even more pessimism toward Brexit’s effects on income than US-based economists did when responding to the same question. IGM put the question to its original Economic Experts Panel in the days immediately following the Brexit vote.
“Limiting trade reduces growth, especially when there are no nascent industries that could generate some long term externalities,” wrote Xavier Freixas of Universitat Pompeu Fabra.
Richard William Blundell of University College London added that “the tariff-free single market across Europe, together with the integration of skilled labor market, adds significantly to UK real income.”
Most respondents to the European panel predicted the Brexit vote would also hurt incomes in the rest of the EU, though nearly 40 percent were either uncertain or disagreed.
The questions were among the first that IGM has posed to its European panel, a close cousin of the American panel IGM assembled nearly six years ago. Both groups attempt to reflect the degree to which economists agree or disagree on major public-policy issues. Like the American panel, the European panel is composed entirely of senior faculty at elite research universities. Panelists include Olivier Blanchard, former chief economist for the International Monetary Fund, Nobel laureate Christopher Pissarides, and faculty from the Einaudi Institute, the University of Zurich, the London School of Economics, and other academic institutions.
Other questions already posed to the European IGM Economic Experts Panel cover topics such as trade, migration, and the benefits of providing local tax incentives to sought-after businesses. The IGM plans to poll the European panel every three weeks starting in early 2017.