Did Austerity Cause Brexit?

Thiemo Fetzer at Warwick University:

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 rules-based 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. These reforms activated existing economic grievances. Further, auxiliary
results suggest that the underlying economic grievances 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.

The perfect storm, Cameron and Osborne.

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