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Exploring Brexit with dynamic spatial panel models: some possible outcomes for employment across the EU regions

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Abstract: Starting with a reduced form derived from standard urban economics theory, this paper estimates the possible job-shortfall across UK and EU regions using a time-space dynamic panel data model with a spatial moving average random effects structure of the disturbances. The paper provides a logical rational for the presence of spatial and temporal dependencies involving the endogenous variable, leading to estimates based on a state-of-the-art dynamic spatial generalized moments estimator proposed by Baltagi et al. (Reg Sci Urban Econ, 2018. 10.1016/j.regsciurbeco.2018.04.013). Given reliable interregional trade estimates, the simulations are based on a linear predictor which utilizes different regional interdependency matrices according to assumptions about interregional trade post-Brexit. The results indicate that heightened barriers to trade will evidently cause job-shortfalls both in the UK and across the EU, but it is also shown that there is a considerable amount of asymmetry in the outcomes across regions and sectors.



Special Issue Paper, C23, C33, C53, E27, F10, J21, R12

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The Annals of Regional Science

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Springer Berlin Heidelberg