Tracing Productivity Growth Channels in the UK

Download or read book Tracing Productivity Growth Channels in the UK written by Mr. Daniel Garcia-Macia and published by International Monetary Fund. This book was released on 2021-11-12 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.