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The UK and Western Productivity Puzzle: Does Arthur Lewis Hold the Key?

Nicholas Oulton ()

International Productivity Monitor, 2019, vol. 36, 110-141

Abstract: A new explanation for the UK and developed world productivity puzzle is proposed which grafts the Lewis (1954) model onto a standard Solow growth model. What is called here the neo-Lewis model is identical to the Solow model in good times. But in bad times foreign demand for a country’s exports is constrained below potential supply. This makes labour productivity growth depend negatively on the growth of labour input and positively on the growth of export demand.The predictions of the neo-Lewis model are tested on data for 23 countries (20 EU and 3 non-EU) and find support. It is also argued that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. This proposition also finds support when tested on a larger sample of 52 countries.

Keywords: United Kingdom; Productivity Puzzle; Neo-Lewis Model (search for similar items in EconPapers)
JEL-codes: O0 O41 (search for similar items in EconPapers)
Date: 2019
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Working Paper: The UK (and Western) Productivity Puzzle: Does Arthur Lewis Hold the Key? (2018) Downloads
Working Paper: The UK (and Western) productivity puzzle: does Arthur Lewis hold the key? (2018) Downloads
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