New dawn fades: The post-referendum rise in import costs has hurt UK workers

a column by Rui Costa, Swati Dhingra and Stephen Machin for VOX: CEPR’s Policy Portal

Some commentators argue that globalisation is systematically connected to the real-wage and productivity stagnation seen across the developed world.

This column analyses the relationship between international trade and worker outcomes in the immediate aftermath of the Brexit referendum, when the value of the sterling fell massively against other nations’ currencies. It finds that the rise in import costs from the sterling depreciation hurt wages and training.

This relative decline in real earnings of workers has reinforced pre-existing real-wage stagnation; UK workers have not fared well since the referendum price rise.

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Dollars and sense: The sterling depreciation and UK price competitiveness

an article by Giancarlo Corsetti, Meredith A. Crowley and Lu Han for VOX: CEPR’s Policy Portal

An immediate impact of the Brexit referendum in 2016 was the large, rapid depreciation of the sterling against all other currencies.The weak pound did not boost UK export volumes, but less clear is whether UK firms lowered their ex column by port prices in line with the weaker pound.

This column shows that the UK export price response to depreciation depends on the currency in which UK firms invoice their cross-border transactions. Firms invoicing in sterling gained competitiveness by passing the sterling’s weakness through to prices, unlike firms invoicing in vehicle or destination currencies,which adjusted their mark-ups.

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