ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Can Income Transfers Help Explain Brexit?

Notwithstanding the conventional narratives of the anti-immigrant sentiments holding sway during the referendum for Brexit, an empirical investigation of the possible factors leading to Brexit does not show any signifi cant correlation between the share of migrants from European Union countries and the regions that voted for Brexit. Share of social security transfers in income was most important in determining if a region voted leave. Decreased employment opportunities and increased hardships that necessitate reliance on welfare payments could have fuelled the anti-immigrant and anti-European sentiment.

The United Kingdom’s (UK) decision to exit the European Union (EU)—dubbed Brexit—has dealt another hard blow to the global economy. The effects on trade and investment flows as a result of this decision cannot be foreseen with any precision. How will short-term and long-term growth in Britain be affected if the decision to withdraw from the EU is institutionalised and operationalised? What effects will the depreciating pound and the flight to safe assets have for future monetary policy decisions of the United States (US), and by extension the world economy?

While fervent forecasts are being made about the future, just as much debate has been directed towards the causes motivating voters’ decisions to leave the EU. Around 52% of voters in the UK chose to exit the EU. Many pollsters and writers have pointed out the fact that a majority of older voters preferred to leave. While the young were largely in favour of staying in the EU, the relatively smaller turnout amongst younger voters saw to it that the leave vote carried the day. Two of the major factors influencing the vote—as reported by many online publications—were education and incomes; regions with higher incomes and a higher percentage of voters with advanced degrees voted remain (McGill 2016).

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