Abstract
After a dramatic slowdown in the 1970s, productivity growth in UK manufacturing in the 1980s returned to something like its pre‐slowdown trend. This paper constructs a quarterly dynamic model of total factor productivity growth in UK manufacturing using cointegration techniques, correcting for a variety of measurement biases. The elasticity of output with respect to R&D capital is estimated at between 0.2 and 0.3, with human capital playing a positive and significant role. The paper also determines how much of the UK productivity slowdown in the 1970s was due to the mis‐measurement of output and the business cycle and how much was due to structural changes. The answer appears to be about half and half.
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