Hostname: page-component-586b7cd67f-t8hqh Total loading time: 0 Render date: 2024-11-22T11:17:40.008Z Has data issue: false hasContentIssue false
  • English
  • Français

IS THE UK PRODUCTIVITY SLOWDOWN UNPRECEDENTED?

Published online by Cambridge University Press:  05 February 2020

Nicholas Crafts  and
Terence C. Mills
Nicholas Crafts
Affiliation:
University of Sussex. E-mail: [email protected].
Terence C. Mills
Affiliation:
Loughborough University. E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

We estimate trend UK labour productivity growth using a Hodrick-Prescott filter method. We use the results to compare downturns where the economy fell below its pre-existing trend. We find that the current productivity slowdown has resulted in productivity being 19.7 per cent below the pre-2008 trend path in 2018. This is nearly double the previous worst productivity shortfall ten years after the start of a downturn. On this criterion the slowdown is unprecedented in the past 250 years. We conjecture that this reflects a combination of adverse circumstances, namely, a financial crisis, a weakening impact of ICT and impending Brexit.

Keywords

Brexitfinancial crisisHodrick-Prescott filterICTproductivity slowdown.C22N13N14O47.
Type
Research Article
Information
National Institute Economic Review , Volume 251 , February 2020 , pp. R47 - R53
Copyright
© National Institute of Economic and Social Research, 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful to Ryland Thomas for advance access to data from the updated version of the Thomas and Dimsdale dataset. An anonymous referee made helpful comments on an earlier version of this paper. The usual disclaimer applies.

References

REFERENCES

Bank of England (2011), Inflation Report, November.Google Scholar
Bean, C. (2016), Independent Review of UK Economic Statistics, London: HMSO.Google Scholar
Bloom, N., Bunn, P., Chen, S., Mizen, P., Smietanka, P. and Thwaites, G. (2019), ‘The impact of Brexit on UK firms’, Bank of England Staff Working Paper No. 818.Google Scholar
Born, B., Mueller, G., Schularick, M. and Sedlacek, P. (2019a), ‘£350 million a week: the output cost of the Brexit vote’, VoxEU, https://voxeu.org/article/300-million-week-output-cost-brexit-vote.Google Scholar
Born, B., Mueller, G., Schularick, M. and Sedlacek, P. (2019b), ‘The costs of economic nationalism: evidence from the Brexit experiment’, Economic Journal, 129, pp. 2722–44.CrossRefGoogle Scholar
Broadberry, S., Campbell, B., Klein, A., Overton, M. and van Leeuwen, B. (2015), British Economic Growth, 1270-1870, Cambridge: Cambridge University Press.Google Scholar
Byrne, D., Fernald, J. and Reinsdorf, M B. (2016), ‘Does the United States have a productivity slowdown or a measurement problem?’, Brookings Papers on Economic Activity (Spring), pp. 109–57.CrossRefGoogle Scholar
Coyle, D. (2017), ‘Do-it-yourself digital: the production boundary and the productivity puzzle’, ESCoE Discussion Paper No. 2017-01.Google Scholar
Crafts, N. (2004), ‘Steam as a general purpose technology: a growth accounting perspective’, Economic Journal, 114, pp. 338–51.CrossRefGoogle Scholar
Crafts, N. (2013), ‘Returning to growth: policy lessons from history’, Fiscal Studies, 34, pp. 255–82.CrossRefGoogle Scholar
Crafts, N. (2018), ‘The productivity slowdown: is it the ‘New Normal’?’, Oxford Review of Economic Policy, 34, pp. 443–60.CrossRefGoogle Scholar
Crafts, N. (2019), ‘The fall in potential output due to the financial crisis: a much bigger estimate for the UK’, Comparative Economic Studies, 61, pp. 625–35.CrossRefGoogle Scholar
Crafts, N. and Fearon, P. (2013), ‘Depression and recovery in the 1930s: an overview’, in Crafts, N. and Fearon, P. (eds), The Great Depression of the 1930s: Lessons for Today, Oxford: Oxford University Press, pp. 1–44.CrossRefGoogle Scholar
EU KLEMS (2017), Growth and Productivity Accounts, www.euklems.netGoogle Scholar
Feinstein, C.H. (1972), National Income, Expenditure and Output of the United Kingdom, 1855–1965, Cambridge: Cambridge University Press.Google Scholar
Flaig, G. (2015), ‘Why we should use high values for the smoothing parameter of the Hodrick-Prescott filter’, Jahrbücher fur Nationalökonomie und Statistik, 235/6, pp. 518–37.Google Scholar
Gerth, F. and Otsu, K. (2018), ‘The post-crisis slump in Europe: a business cycle accounting analysis’, The B.E. Journal of Macroeconomics, 18, pp. 1–24.Google Scholar
Gorodnichenko, Y., Revoltella, D., Svejnar, J. and Weiss, C. (2018), ‘Resource misallocation in European firms: the role of constraints, firm characteristics and managerial decisions’, NBER Working Paper no. 24444.Google Scholar
Hamilton, J.D. (2018), ‘Why you should never use the Hodrick-Prescott filter’, Review of Economics and Statistics, 100, pp. 831–43.CrossRefGoogle Scholar
Harvey, A.C. and Trimbur, T. (2008), ‘Trend estimation and the Hodrick-Prescott filter’, Journal of the Japan Statistical Society, 38, pp. 41–9.CrossRefGoogle Scholar
Hodrick, R.J. and Prescott, E.C. (1997), ‘Postwar US business cycles: an empirical investigation’, Journal of Money, Credit and Banking, 29, pp. 1–16.CrossRefGoogle Scholar
Office for National Statistics (2019), Labour Productivity UK: October to December 2018.Google Scholar
Mills, T.C. (2019), Applied Time Series Analysis: a Practical Guide to Modelling and Forecasting, London: Academic Press.Google Scholar
Phelps-Brown, E.H. and Handfield-Jones, S.J. (1952), ‘The climacteric of the 1890s: a study in the expanding economy’, Oxford Economic Papers, 4, pp. 266–307.CrossRefGoogle Scholar
Riley, R., Rincon-Aznar, A. and Samek, L. (2018), ‘Below the aggregate: a detailed account of the UK productivity puzzle’, ESCoE Discussion Paper No. 2018-06.Google Scholar
Ristuccia, C.A and Solomou, S. (2014), ‘Can general purpose technology theory explain economic growth? Electrical power as a case study’, European Review of Economic History, 18, pp. 227–47.CrossRefGoogle Scholar
Sefton, J. and Weale, M. (1995), Reconciliation of National Income and Expenditure: Balanced Estimates of National Income for the United Kingdom, 1920–1990, Cambridge: Cambridge University Press.Google Scholar
Solomou, S. and Weale, M. (1991), ‘Balanced estimates of UK GDP, 1870–1913’, Explorations in Economic History, 28, pp. 54–63.CrossRefGoogle Scholar
Syverson, C. (2017), ‘Challenges to mismeasurement explanations for the U.S. productivity slowdown’, Journal of Economic Perspectives, 31, pp. 165–86.CrossRefGoogle Scholar
The Conference Board (2019), Total Economy Database: Growth Accounting and Total Factor Productivity, 1990–2018, https://www.conference-board.org/data/economydatabase/.Google Scholar
Thomas, R. and Dimsdale, N. (2017), ‘A millennium of UK data’, Bank of England OBRA Dataset, http://www.bankofengland.co.uk/research/Pages/onebank/threecenturies.aspx.Google Scholar