The Decline of British Manufacturing, 1973–2012: The Role of Total Factor Productivity

an article by Richard Harris and John Moffat (Durham University Business School, UK) published in National Institute Economic Review Volume 247 Issue 1 (February 2019)

Abstract

This paper uses plant-level estimates of total factor productivity covering 40 years to examine what role, if any, productivity has played in the decline of output share and employment in British manufacturing.

The results show that TFP growth in British manufacturing was negative between 1973 and 1982, marginally positive between 1982 and 1994 and strongly positive between 1994 and 2012. Poor TFP performance therefore does not appear to be the main cause of the decline of UK manufacturing.

Productivity growth decompositions show that, in the latter period, the largest contributions to TFP growth come from foreign-owned plants, industries that are heavily involved in trade, and industries with high levels of intangible assets.

JEL Classification: D22, D24, L6

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Productivity effects of internationalisation through the domestic supply chain

a column by Bruno Merlevede and Angelos Theodorakopoulos for VOX: CEPR’s Policy Portal

Studies of the implications of trade openness for local economies rarely address the domestic supply chain.

This column examines whether indirect effects of internationalisation affect the domestic supply chain. Micro-level data for manufacturing firms across 19 EU countries, combined with input-output tables, show that domestic access to intermediate inputs that are also exported leads to higher levels of efficiency.

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Measuring The Permanent Costs of Brexit

an article by Hugo Erken, Raphie Hayat, Carlijn Prins, Marijn Heijmerikx and Inge de Vreede (Rabobank, Netherlands) published in National Institute Economic Review Volume 244 Issue 1 (May 2018)

Abstract

We analyse the costs of Brexit.

The results show that by 2030 a hard Brexit would reduce cumulative GDP growth by 18 percentage points compared to a situation where the UK continued its EU membership.

The economic damage in our FTA and soft Brexit scenarios is less severe than in our hard Brexit scenario, although it will still cost the UK economy roughly 12.5 percentage points and 10 percentage points of cumulative GDP growth by 2030, respectively.

We find much larger negative effects than most existing studies that use macroeconometric modelling to assess the effects of Brexit.

This is due to two reasons.

• First, we use an improved tariff version of the macroeconometric model NiGEM, which enables us better to assess the negative impact of cost-push inflation resulting from imposed trade barriers.
• Second, we estimate a new productivity model for the UK, which allows us to gauge adequately the negative UK-specific effects on productivity caused by Brexit.

JEL Classification F15, F17, F43, D24

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