The UK Productivity “Puzzle” in an International Comparative Perspective

John Fernald () and Robert Inklaar

No 2022-07, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: The UK’s slow productivity growth since 2007 has been referred to as a “puzzle”, as if it were a particularly UK-specific challenge. In this paper, we highlight how the United States and northern Europe experienced very similar slowdowns. The common slowdown in productivity growth was a slowdown in total factor productivity (TFP) growth; we find little evidence that capital deepening was an important independent factor. From a conditional-convergence perspective, most of the UK slowdown follows from the slowdown at the U.S. frontier. From the mid-1980s to 2007, the UK’s relative productivity level moved closer to the level of the U.S. and northern Europe, driven by essentially complete convergence in market services TFP. In contrast, manufacturing lost ground relative to the U.S. frontier prior to 2007, and remains far below the frontier. The relative ground lost after 2007 is modest—cumulating to about 4 percentage points—and is largely attributable to somewhat unfavorable industry weights and industry-specific issues in mining, rather than a systematic UK competitiveness problem.

Keywords: productivity growth; Great Recession; convergence (search for similar items in EconPapers)
JEL-codes: D24 E23 E44 F45 O47 (search for similar items in EconPapers)
Pages: 47
Date: 2022-03-23
New Economics Papers: this item is included in nep-eec, nep-eff and nep-mac
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Working Paper: The UK Productivity Puzzle in an International Comparative Perspective (2022)
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DOI: 10.24148/wp2022-07

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