Institutional Shocks and Migration Adjustment: Evidence from the Syrian Crisis and Brexit’s Referendum and Implementation

Assaf Razin

No 34941, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper interprets Brexit as a two-stage institutional rupture that reshaped migration through expectations, exposure, and stress channels. Using a UK–Germany Difference-in-Differences framework, I show that the 2016 referendum generated a sharp decline in UK net migration relative to Germany, driven primarily by a contraction in immigration rather than simple outward flight. The 2021 termination of EU free movement reinforced this adjustment on the gross inflow margin, completing the structural reallocation of mobility flows. Migration responses were not uniform: countries more deeply integrated into EU mobility networks prior to 2016 experienced significantly stronger contractions, confirming that Brexit propagated along pre-existing exposure channels. Embedding macro-financial stress interactions reveals that institutional fragility amplified the referendum shock, particularly during the expectations phase. Stress intensified migration contractions in exposed settings in 2016, while post-2021 responses became more heterogeneous, especially on the emigration margin. Together, the results support a sequential interpretation: an anticipatory expectations shock in 2016 followed by regime completion in 2021. Beyond short-run behavioral adjustments, the findings are consistent with the fiscal self-selection framework. Increases in perceived institutional risk alter the relative returns to skill and investment, reshaping both the composition of migration and foreign direct investment. Because skilled labor and FDI are complementary, institutional credibility shocks can generate self-reinforcing declines in human capital inflows and investment. Brexit therefore emerges not merely as a trade or regulatory event, but as an institutional credibility shock in which migration operates both as an outcome and as a transmission mechanism linking regime change to long-run growth dynamics.

JEL-codes: F0 F29 F47 P0 P5 (search for similar items in EconPapers)
Date: 2026-03
New Economics Papers: this item is included in nep-mig and nep-opm
Note: IFM AP
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