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The UK Productivity Shortfall in an Era of Rising Labour Supply

Author

Listed:
  • Benito, Andrew

    (University of Warwick)

  • Young, Garry

    (National Institute of Economic and Social Research (NIESR))

Abstract
Labour productivity stagnated in the UK in the years between the financial crisis and the emergence of Covid-19. At the same time labour supply and employment grew strongly, driven primarily by net inward migration. While labour productivity should be independent of labour supplied in the long run, this need not be the case in the medium-run. Our evidence suggests that around one-fifth, or 4pp, of the 25 log point fall in productivity from its previous trend can be explained by increased labour supply, with idiosyncratic factors and a slowdown in TFP growth accounting for most of the shortfall.

Suggested Citation

  • Benito, Andrew & Young, Garry, 2021. "The UK Productivity Shortfall in an Era of Rising Labour Supply," IZA Discussion Papers 14620, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14620
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    File URL: https://docs.iza.org/dp14620.pdf
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    More about this item

    Keywords

    productivity; labour supply; capital deepening;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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