Two Free DP Downloads 09 January 2020 - THE GLOBAL IMPACT OF BREXIT UNCERTAINTY and DO FIRMS RESPOND TO GENDER PAY GAP TRANSPARENCY?

Thursday, January 9, 2020

THE GLOBAL IMPACT OF BREXIT UNCERTAINTY 
Tarek Hassan, Stephan Hollander, Laurence van Lent, Ahmed Tahoun   
CEPR DP No. 14253 | 28 December 2019

The impact of Brexit-related uncertainty extends far beyond UK or even European firms: US and international firms most exposed to Brexit uncertainty have lost a substantial fraction of their market value and have also reduced hiring and investment. 

This is a central finding of a new CEPR study by Tarek Hasan and colleagues, which measures the impact of Brexit on firms in the UK and around the world, identifying which firms expect to gain or lose from Brexit and which are most affected by Brexit uncertainty. Among the findings: 

  • International and UK firms overwhelmingly expect negative direct effects from Brexit. 
  • Most prominently, firms expect difficulties from regulatory divergence, reduced labour mobility, limited trade access and the costs of post-Brexit operational adjustments. 
  • This negative sentiment is recognised and priced in stock markets but has not yet significantly affected firm actions.
  • Ireland’s Brexit risk is even larger that the UK’s. 
  • ‘Brexit winners’ in the UK most often simply point out they are currently not much affected by the prospect of Brexit. 
  • Firm policies in the face of rising Brexit uncertainty shows consistently lower investment rates and reduced hiring. 

The results of the study suggest that the greater rupture between the UK and the European Union, the larger these direct effects (including post-Brexit adjustment costs) will be. The authors conclude that when Brexit is enacted, the consequences for investments and employment may well be larger than those associated with Brexit uncertainty alone.

Figure 1: Mean BrexitRisk by Country


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GENDER PAY TRANSPARENCY LAW REDUCES WAGE DISCRIMINATION WITHIN FIRMS: Evidence from Denmark
Morten Bennedsen, Elena Simintzi, Margarita Tsoutsoura, Daniel Wolfenzon   
CEPR DP No. 14237 | 22 December 2020

Wage transparency laws can reduce the gender pay gap by slowing wage growth for male employees and causing an increase in the hiring and promoting of women within firms. These are the central findings of a new CEPR study by Morten Bennedsen and colleagues, which investigates the effect of pay transparency on gender pay gap and firm outcomes.

The study, which uses evidence from a 2006 legislation change in Denmark that required firms to provide gender disaggregated wage statistics, shows that after the law passed:

  • The gender pay gap declines by approximately two percentage points, or a 7% reduction relative to the pre-legislation mean. 
  • Wages of male employees grow 1.67% slower than wages of male employees in control firms.
  • Male employees experience slower wage growth relative to female employees. 
  • Companies subject to the regulation are more likely to hire and promote more women. 
  • There is a reduction in firm productivity and in the overall wage bill, leaving firm profitability unchanged.

The results of the study indicate that firms with higher gender pay inequality close the gender gap more aggressively, perhaps due to the fact that transparency leads to an increase in accountability in these firms. 

 

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