How Can The European Union's Current Free Movement Of Workers Policy Between Member States Be Quantitatively Modeled To Accurately Estimate The Impact Of Brexit On The UK's Labor Market And Subsequent Effects On Regional Productivity, Considering Factors Such As Skill Selectivity, Network Effects, And Occupational Segregation?

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To model the impact of Brexit on the UK's labor market and productivity, a comprehensive approach integrating multiple methodologies is necessary. Here's a structured plan:

1. Modeling Approach

  • Gravity Model: Apply to estimate labor mobility between the UK and EU countries, considering factors like distance, economic size, and migration policies.
  • Two-Country General Equilibrium Model: Develop to simulate labor flows and economic impacts, incorporating skill selectivity, network effects, and occupational segregation.
  • Input-Output Model: Use to assess sectoral dependencies on migrant labor and resultant productivity changes.
  • Production Function Approach: Measure productivity impacts using Total Factor Productivity (TFP) or labor productivity metrics.

2. Data Sources

  • Utilize UK Labour Force Survey, Eurostat, and ONS migration data.
  • Categorize workers by skill levels (high, medium, low) using education as a proxy.

3. Scenario Analysis

  • Define Brexit scenarios: hard vs. soft Brexit.
  • Employ Computable General Equilibrium (CGE) models for economic impact estimation.
  • Conduct sensitivity analysis to address migration and policy uncertainties.

4. Regional Disparities

  • Apply spatial econometrics to model regional impacts, focusing on areas dependent on EU workers.

5. Calibration and Validation

  • Use historical data for model calibration and validation.
  • Engage peer review and stakeholder feedback for model refinement.

6. Policy Recommendations

  • Develop sector-specific policies, such as training programs or immigration adjustments, based on model outcomes.

7. Considerations and Limitations

  • Acknowledge potential EU spill-over effects and trade policy changes.
  • Note data limitations and use pre-Brexit trends for scenario assumptions.

8. Integration of Factors

  • Incorporate skill selectivity, network effects, and occupational segregation into models for accurate impact estimation.

By combining these elements, the model will provide a robust analysis of Brexit's impact on the UK labor market and productivity, offering valuable insights for policy-making.