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Cracking the Productivity Code: An International Comparison of UK Productivity

Author

Listed:
  • John Van Reenen
  • Xuyi Yang
Abstract
We examine the growth and level of UK productivity compared to France, Germany and the United States. There has been a marked slowdown in labour productivity growth: comparing the dozen years before and after the Global Financial Crisis. The average annual growth of the UK’s real value added per hour in the market economy has fallen from 2.5 per cent to 0.5 per cent. Just over half of this two percentage point slowdown is due to slower TFP growth, which is broadly similar in magnitude across countries. Britain experienced a much larger slowdown in the growth of capital intensity than other countries and it is this (alongside a smaller contribution from slow skills growth) which accounts for the particularly severe ‘productivity puzzle’. The level of UK labour productivity is also low compared to peers, especially the United States. In 2019, lower tangible and intangible capital intensity accounted for about half of this gap. These findings suggest that UK policy should focus on the problem of chronic under-investment.

Suggested Citation

  • John Van Reenen & Xuyi Yang, 2024. "Cracking the Productivity Code: An International Comparison of UK Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 46, pages 60-82, Spring.
    • Handle: RePEc:sls:ipmsls:v:46:y:2024:3
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    References listed on IDEAS

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    More about this item

    Keywords

    Productivity; Slowdown; United Kingdom; Capital Intensity; Global Financial Crisis;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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