Free Trade Agreements and Inequality: The Prospect for the UK Post-Brexit

Osama Alfalah, Mohammad Ali and Abdullah Alhammadi
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Osama Alfalah: Gulf University for Science and Technology, Kuwait
Mohammad Ali: The American University of Kuwait, Kuwait
Abdullah Alhammadi: Independent Researcher

International Journal of Economics and Financial Issues, 2024, vol. 14, issue 4, 245-252

Abstract: This paper examines the potential effects of Brexit on income inequality in the United Kingdom (UK) and utilizes empirical methods to predict these effects. The study focuses on the impact of trade and Foreign Direct Investment (FDI) on income inequality, using macroeconomic data from 1971 to 2019. By employing cointegration techniques and an Error Correction Model (ECM) on annual time series data, the analysis reveals that higher levels of trade have historically reduced income inequality in the UK over the long term. Consequently, changes in trade resulting from Brexit are expected to have a negative influence on the distribution of income and wealth in the UK. On the other hand, the study finds that higher FDI has only had a short-term negative effect on income distribution in the UK.

Keywords: Brexit; Inequality; Trade; Foreign Direct Investment; Free Trade Agreements (search for similar items in EconPapers)
JEL-codes: D63 F20 F40 F53 (search for similar items in EconPapers)
Date: 2024
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