Tracing Productivity Growth Channels in the UK

By Daniel Garcia-Macia, Julia Korosteleva

November 12, 2021

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Format: Chicago

Daniel Garcia-Macia, and Julia Korosteleva. Tracing Productivity Growth Channels in the UK, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

What drove the UK productivity slowdown post-GFC, and how is the post-Covid recovery expected to differ? This paper traces the sources of TFP growth in the UK over the last two decades through the lens of a structural model of innovation, using registry data on the universe of firms. The dominant innovation source in the pre-GFC decade were improvements by incumbent firms on their own products, whereas creation of new varieties by entrants took a leading role post-GFC. In the Covid recovery, survey data suggests that creative destruction (i.e., innovation replacing other firms’ products) is expected to gain importance. This emphasizes the need for growth policies that facilitate labor and capital reallocation across firms, in addition to R&D support.

Subject: Employment, Job creation, Job destruction, Labor, Production, Productivity, Total factor productivity

Keywords: Creative destruction, Economic growth, Employment, Exit rate, GFC decade, Global, Innovation, Innovation source, Job creation, Job destruction, Leading role, Productivity, Sources of TFP growth, Total factor productivity, UK market economy, UK productivity slowdown post-GFC

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/273
Stock No:

WPIEA2021273
ISBN:

9781616356248
ISSN:

1018-5941

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