Fetzer, Thiemo (2018) Did austerity cause Brexit? Working Paper. Coventry: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1170). (Unpublished)

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Abstract

Did austerity cause Brexit? This paper shows that the rise of popular support for the UK Independence Party (UKIP), as the single most important correlate of the subsequent Leave vote in the 2016 European Union (EU) referendum, along with broader measures of political dissatisfaction, are strongly and causally associated with an individual’s or an area’s exposure to austerity since 2010. In addition to exploiting data from the population of all electoral contests in the UK since 2000, I leverage detailed individual level panel data allowing me to exploit within-individual variation in exposure to specific welfare reforms as well as broader measures of political preferences. The results suggest that the EU referendum could have resulted in a Remain victory had it not been for a range of austerity-induced welfare reforms. Further, auxiliary results suggest that the welfare reforms activated existing underlying economic grievances that have broader origins than what the current literature on Brexit suggests. Up until 2010, the UK’s welfare state evened out growing income differences across the skill divide through transfer payments. This pattern markedly stops from 2010 onwards as austerity started to bite.

Item Type: Working or Discussion Paper (Working Paper) Divisions: Faculty of Social Sciences > Economics Series Name: Warwick economics research papers series (WERPS) Publisher: University of Warwick. Department of Economics Place of Publication: Coventry ISSN: 0083-7350 Official Date: 24 July 2018 Dates: Date Event 24 July 2018 Published Date of first compliant deposit: 12 March 2018 Number: 1170 Number of Pages: 38 Institution: University of Warwick Status: Not Peer Reviewed Publication Status: Unpublished Access rights to Published version: Open Access Description: This paper also appears as CAGE discussion paper 381 Related URLs: Related item in WRAP

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