Monday, 20 April 2015

The UK Productivity Puzzle

We have a new paper on this:

Haskel J, Goodridge P, Wallis G, 2015, Accounting for the UK productivity puzzle: a decomposition and predictions, Publisher: Imperial College Business School

This paper is featured in the FT today:
Weighing up four theories on the UK’s productivity gap:

Abstract is

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. Our data indicates an implied productivity gap of 12.6% in 2011 relative to the productivity level on pre-recession trends. We find (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. 

(Apologies to those who logged into an earlier blog version under this title that linked to a paper on science)

Spending on Science, new paper

We have a new paper on this: Goodridge, P., Haskel, J., Hughes, A., and Wallis, G., (2015). The contribution of public and private R&D to UK productivity growth, Imperial College Discussion Paper, 2015/03, March 2015,   available at

The abstract  is

We estimate the contribution of public and private R&D to UK productivity growth on industry data, 1992-2007. R&D affects productivity growth via (1) R&D input, valued at competitive factor shares and (2) (Domar-Hulten weighted) industry TFP growth if there are (a) within-industry spillovers (b) between-industry spillovers and (c) spillovers from public-sector R&D to the market sector. Thus effects depend upon factor shares, spillovers and industrial structure. We estimate all these effects and perform counter-factual experiments such as e.g. additional government spending on the science budget, increased manufacturing R&D spending and the effects of such changes with a different industrial structure.

Our central estimate of the rate of return to public spending on science is  20%.

This the article behind my interview in the FT this weekend,

Friday, 17 April 2015

Interview in the FT

I very kindly get an interview in the FT this weekend:

Should national accounts stick close to business accounts?

My friend and co-author @carolcorrado makes a very valuable point.  
  1. People say that national accounts should stick close to business accounts.  So national accounts should not capitalise intangibles since business accounts don't do so.
  2. But, that's not so clear. When companies merge, and intangible value is realised in e.g. pricing goodwill, that is put on the balance sheet.  So, in fact, the treatment of intangibles in business accounts is inconsistent between merging and non-merging companies.  
  3. Thus to say that national accounts should stick to business accounts could mean capitalising intangibles but equally not capitalising them.

Knowledge workers demystified