Accounting for the UK productivity puzzle: a decomposition and predictions

Accounting for the UK productivity puzzle: a decomposition and predictions
Document type
Discussion paper
Goodridge, Peter; Haskel, Jonathan; Wallis, Gavin
Imperial College Business School
Date of publication
1 February 2015
Discussion Paper 2015/02
Trends: economic, social and technology trends affecting business
Business and management
Material type

This item is only available to registered users

Register now or Log in

Your use of this content is subject to the terms and conditions of this portal

This paper revisits the UK productivity puzzle using a new set of data on outputs and inputs and clarifying the role of output mismeasurement, input growth, and industry effects. The data indicates an implied productivity gap of 12.6% in 2011 relative to the productivity level on pre-recession trends. The paper finds (a) the labour productivity puzzle is a TFP puzzle, since it is not explained by the contributions of labour or capital services (b) the re-allocation of labour between industries deepens rather than explains the puzzle (i.e. there has been actually been a re-allocation of hours away from low-productivity industries and toward high productivity industries (c) capitalisation of R&D does not explain the puzzle (d) assuming increased scrapping rates since the recession, a 25% (50%) increase in depreciation rates post-2009 can potentially explain 16%(33%) of the puzzle (e) industry data shows 33% of the TFP puzzle can be explained by weak TFP growth in the oil and gas and financial services sectors and (f) cyclical effects via factor utilisation could potentially explain 14% of the puzzle. Continued weakness in finance would suggest a future lowering of TFP growth to around 1% pa from a baseline of 1.2% pa.

Related to Trends: economic, social and technology trends affecting business

Follow the money: exploring the link between UK growth and workers' pay packets

Downloadable briefing note looking at the relationship between productivity and pay growth

From precarity to empowerment: women and the future of work

Downloadable paper on ensuring a fair future of work for women

Economic insecurity: the case for a 21st century safety net

Downloadable paper on how economic insecurity is experienced by workers

Mapping millennials' living standards

Downloadable briefing note on UK millennials, including pay and employment

More items related to this subject