Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-27T17:37:11.955Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  01 January 2020

Richard Harris  and
John Moffat
Richard Harris*
Affiliation:
Department of Economics and Finance, Durham University Business School
John Moffat*
Affiliation:
Department of Economics and Finance, Durham University Business School
*
E-mails: [email protected]; [email protected]
E-mails: [email protected]; [email protected]
Get access Rights & Permissions [Opens in a new window]

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.

Keywords

total factor productivitymanufacturingdecompositionD22D24L6
Type
Research Articles
Information
National Institute Economic Review , Volume 247 , February 2019 , pp. R19 - R31
Copyright
Copyright © 2019 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation of analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. Supplementary material for this article is available online.

References

Ackerberg, D., Caves, K. and Frazer, G. (2015), ‘Identification properties of recent production function estimators’, Econometrica, 83(6), pp. 2411–51.CrossRefGoogle Scholar
Amiti, M. and Wei, S.-J. (2009), ‘Service offshoring and productivity: evidence from the US’, World Economy, 32(2), pp. 203–20.10.1111/j.1467-9701.2008.01149.xCrossRefGoogle Scholar
Barney, J. (1991), ‘Firm resources and sustained competitive advantage’, Journal of Management, 17(1), pp. 99–120.10.1177/014920639101700108CrossRefGoogle Scholar
Bartelsman, E. and Dhrymes, P. (1998), ‘Productivity dynamics: US manufacturing plants, 1972–1986’, Journal of Productivity Analysis, 9(1), pp. 5–34.CrossRefGoogle Scholar
Baumol, W. (1984), ‘On productivity growth in the long run’, Atlantic Economic Journal, 12(3), pp. 4–10.CrossRefGoogle Scholar
BIS (2010), ‘Manufacturing in the UK: an economic analysis of the sector’, BIS Occasional Paper 10A, Department for Business, Innovation and Skills.Google Scholar
BIS (2012a), ‘The impact of investment in intangible assets on productivity’, BIS Research Paper 75, Department for Business, Innovation and Skills.Google Scholar
BIS (2012b), ‘Industrial strategy: UK sector analysis’, BIS Economics Paper 18, Department for Business, Innovation and Skills.Google Scholar
Bosworth, D., Jones, P. and Wilson, R. (2008), ‘The transition to a highly qualified workforce’, Education Economics, 16(2), pp. 127–47.CrossRefGoogle Scholar
Bruno, M. (1978), ‘Duality, intermediate inputs and value-added’, in Fuss, M. and McFadden, D. (eds), Production Economics: A Dual Approach to Theory and Applications, pp. 4–16, Amsterdam: North-Holland.Google Scholar
Bryson, A. and Forth, J. (2010), ‘Trade union membership and influence 1999–2009’, CEP Discussion Paper 1003, Centre for Economic Performance.Google Scholar
Bryson, A., Forth, J. and Kirby, S. (2005), ‘High-involvement management practices, trade union representation and workplace performance in Britain’, Scottish Journal of Political Economy, 52(3), pp. 451–91.CrossRefGoogle Scholar
Cameron, G. (2003), ‘Why did UK manufacturing productivity growth slow down in the 1970s and speed up in the 1980s?’, Economica, 70(277), pp. 121–41.CrossRefGoogle Scholar
Castellacci, F. and Lie, C.M. (2015), ‘Do the effects of R&D tax credits vary across industries? A meta-regression analysis’, Research Policy, 44(4), pp. 819–32.10.1016/j.respol.2015.01.010CrossRefGoogle Scholar
Caves, R. (1998), ‘Industrial organization and new findings on the turnover and mobility of firms’, Journal of Economic Literature, 36(4), pp. 1947–82.Google Scholar
Corrado, C., Haskel, J. and Jona-Lasinio, C. (2012), ‘Productivity growth, intangible assets and ICT: some international evidence, http://www.worldklems.net/conferences/worldklems2012/worldklems2012_Jona_Lasinio.pdf.Google Scholar
Corrado, C., Hulten, C. and Sichel, D. (2006), ‘Intangible capital and economic growth’, NBER Working Paper 11948, National Bureau of Economic Research.CrossRefGoogle Scholar
Criscuolo, C. and Leaver, M. (2005), Offshore Outsourcing and Productivity, Paris, OECD available at http://www.oecd.org/sti/sci-tech/35637436.pdf.Google Scholar
Dal Borgo, M., Goodridge, P., Haskel, J. and Pesole, A. (2013)., ‘Productivity and growth in UK industries: an intangible investment approach’, Oxford Bulletin of Economics and Statistics, 75(6), pp. 806–34.Google Scholar
Diewert, W.E. (1978), ‘Hicks’ aggregation theorem and the existence of a real value-added function’, in Fuss, M. and McFadden, D. (eds), Production Economics: A Dual Approach to Theory and Applications, pp. 17–52, Amsterdam: North-Holland.Google Scholar
Disney, R., Haskel, J. and Heden, Y. (2003), ‘Restructuring and productivity growth in UK manufacturing’, Economic Journal, 113(489), pp. 666–94.CrossRefGoogle Scholar
Doucouliagos, C. and Laroche, P. (2003), ‘What do unions do to productivity? A meta-analysis’, Industrial Relations: A Journal of Economy and Society, 42(4), pp. 650–91.Google Scholar
Färe, R. and Primont, D. (1995), Multi-Output Production and Duality: Theory and Applications, Dordrecht: Springer Netherlands.CrossRefGoogle Scholar
Fariñas, J., López, A. and Martín-Marcos, A. (2011), ‘Offshoring, domestic outsourcing and productivity: a production function approach ISGEP Workshop’, available at http://www.leuphana.de/fileadmin/user_upload/PERSONALPAGES/Fakultaet_2/Wagner_Joachim/files/Farinas_Lopez_Martin-Marcos.pdf.Google Scholar
Feenstra, R., Inklaar, R. and Timmer, M. (2013), PWT 8.0 – A User Guide, available at http://www.rug.nl/research/ggdc/data/pwt/v80/pwt_80_user_guide.pdf.Google Scholar
Felstead, A., Gallie, D., Green, F. and Zhou, Y. (2007), Skills at Work, 1986–2006, Oxford: ESRC Research Centre on Skills, Knowledge and Organizational Performance.Google Scholar
Field, S. and Franklin, M. (2013), Micro-data Perspectives on the UK Productivity Conundrum – An Update, Newport, Office for National Statistics, available at http://www.ons.gov.uk/ons/dcp171766_329419.pdf.Google Scholar
Foster, L., Haltiwanger, J. and Krizan, C.J. (2001), ‘Aggregate productivity growth: lessons from microeconomic evidence’, in Hulten, C., Dean, E.R. and Harper, M.J. (eds), New Developments in Productivity Analysis, pp. 303–72, Chicago: University of Chicago Press.Google Scholar
Gandhi, A., Navarro, S. and Rivers, D. (2012), ‘On the identification of production functions: how heterogenous is productivity’, Collegio Carlos Alberto Working Paper 288, Collegio Carlos Alberto.Google Scholar
Gennaioli, N., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2013), ‘Human capital and regional development’, The Quarterly Journal of Economics, 128(1), pp. 105–64.CrossRefGoogle Scholar
Girma, S., Greenaway, D. and Wakelin, K. (2001), ‘Who benefits from foreign direct investment in the UK?’, Scottish Journal of Political Economy, 48(2), pp. 119–33.CrossRefGoogle Scholar
Gorg, H., Henry, M. and Strobl, E. (2008), ‘Grant support and exporting activity’, Review of Economics and Statistics, 90(1), pp. 168–74.CrossRefGoogle Scholar
Government Office for Science (2013), The Future of Manufacturing: A New Era of Opportunity and Challenge for the UK, London, available at http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255922/13-809-future-manufacturing-project-report.pdf.Google Scholar
Gregory, M., Zissimos, B. and Greenhalgh, C. (2001), ‘Jobs for the skilled: how technology, trade, and domestic demand changed the structure of UK employment, 1979–90’, Oxford Economic Papers, 53(1), pp. 20–46.CrossRefGoogle Scholar
Griffith, R. (1999), ‘Using the ARD establishment level data to look at foreign ownership and productivity in the United Kingdom’, Economic Journal, 109(456), pp. F416–42.CrossRefGoogle Scholar
Griffith, R., Redding, S. and Simpson, H. (2005), ‘The dynamics of establishment productivity: technology transfer and productivity dispersion’, IFS Working Paper, London, Institute for Fiscal Studies, available at http://www.princeton.edu/~reddings/papers/grs_v2_final.pdf.Google Scholar
Harris, R. (1987), ‘The role of manufacturing in regional growth’, Regional Studies, 21(4), pp. 301–12.CrossRefGoogle Scholar
Harris, R. and Drinkwater, S. (2000), ‘UK plant and machinery capital stocks and plant closures’, Oxford Bulletin of Economics and Statistics, 62(2), pp. 243–65.CrossRefGoogle Scholar
Harris, R. and Moffat, J. (2012), ‘Is productivity higher in British cities?’, Journal of Regional Science, 52(5), pp. 762–86.CrossRefGoogle Scholar
Harris, R. and Moffat, J. (2013a), ‘The direct contribution of FDI to productivity growth in Britain, 1997–2008’, The World Economy, 36(6), pp. 713–36.CrossRefGoogle Scholar
Harris, R. and Moffat, J. (2013b), ‘Intangible assets, absorbing knowledge and its impact on firm performance: theory, measurement and policy implications’, Contemporary Social Science: Journal of the Academy of Social Sciences, 8(3), pp. 346–61.CrossRefGoogle Scholar
Harris, R. and Moffat, J. (2015a), ‘The impact of exporting and importing goods and services on productivity in the UK’, The World Economy, 38(11), pp. 1781–94.CrossRefGoogle Scholar
Harris, R. and Moffat, J. (2015b), ‘Plant-level determinants of total factor productivity in Great Britain, 1997–2008’, Journal of Productivity Analysis, 44(1), pp. 1–20.CrossRefGoogle Scholar
Harris, R. and Moffat, J. (2016), ‘The UK productivity puzzle, 2008–2012: evidence using plant level estimates of total factor productivity’, Oxford Economic Papers, 69 (3). pp. 529–49.Google Scholar
Harris, R. and Robinson, C. (2003), ‘Foreign ownership and productivity in the United Kingdom estimates for U.K. manufacturing using the ARD’, Review of Industrial Organization, 22(3), pp. 207–23.CrossRefGoogle Scholar
Kaldor, N. (1966), Causes of the Slow Rate of Economic Growth in the United Kingdom, Cambridge, UK: Cambridge University Press.Google Scholar
Kogut, B. and Zander, U. (1996), ‘What firms do? Coordination, identity, and learning’, Organization Science, 7(5), pp. 502–18.CrossRefGoogle Scholar
Krugman, P. (1997), The Age of Diminished Expectations: US Economic Policy in the 1990s, 3rd edn., Cambridge, MA, and London: MIT Press.Google Scholar
Levinsohn, J. and Petrin, A. (2003), ‘Estimating production functions using inputs to control for unobservables’, The Review of Economic Studies, 70, pp. 317–41.CrossRefGoogle Scholar
Madsen, J. (2013), ‘Human capital and the world technology frontier’, Review of Economics and Statistics, 96(4), pp. 676–92.Google Scholar
Martin, R. (2008), ‘Productivity dispersion, competition and productivity measurement’, CEP Discussion Paper 692, Centre for Economic Performance.Google Scholar
Mason, G., O'Mahony, M. and Riley, R. (2018), ‘What is holding back UK productivity? Lessons from decades of measurement’, National Institute Economic Review, 246(1), pp. R24–35.CrossRefGoogle Scholar
Melitz, M. and Polanec, S. (2015), ‘Dynamic Olley-Pakes productivity decomposition with entry and exit’, The RAND Journal of Economics, 46(2), pp. 362–75.CrossRefGoogle Scholar
Metcalf, D. (2003), ‘Unions and productivity, financial performance and investment: international evidence’, in Addison, J. and Schnabel, C. (eds), International Handbook of Trade Unions, pp. 118–71, Cheltenham, UK, Northampton, MA: Edward Elgar.Google Scholar
Moffat, J. (2013), ‘Recent micro-economic trends in the manufacturing sector’, Future of Manufacturing EP23, Government Office for Science.Google Scholar
Oesch, D. and Rodríguez Menés, J. (2011), ‘Upgrading or polarization? Occupational change in Britain, Germany, Spain and Switzerland, 1990–2008’, Socio-Economic Review, 9(3), pp. 503–31.CrossRefGoogle Scholar
Olley, G.S. and Pakes, A. (1996), ‘The dynamics of productivity in the telecommunications equipment industry’, Econometrica, 64(6), pp. 1263–97.CrossRefGoogle Scholar
O'Donnell, C. (2016), ‘Using information about technologies, markets and firm behaviour to decompose a proper productivity index’, Journal of Econometrics, 190(2), pp. 328–40.Google Scholar
O'Mahony, M. (1998), Britain's Productivity Performance 1950–1996: An International Perspective, London: National Institute of Economics and Social Research.Google Scholar
O'Mahony, M. and de Boer, W. (2002), ‘Britain's relative productivity performance: has anything changed?’, National Institute Economic Review, 179(1), pp. 38–43.CrossRefGoogle Scholar
O'Mahony, M. and Timmer, M. (2009), ‘Output, input and productivity measures at the industry level: the EU KLEMS Database’, Economic Journal, 119, pp. F374–403.CrossRefGoogle Scholar
Osborne, G. (2011), Budget Statement by the Chancellor of the Exchequer, available at http://webarchive.nationalarchives.gov.uk/20130129110402/ http://www.hm-treasury.gov.uk/2011budget_speech.htm. Pencavel, J. (2003), ‘The surprising retreat of union Britain’, NBER Working Paper 9564, Cambridge, MA.Google Scholar
Peng, F. and Kang, L. (2013), ‘Labor market institutions and skill premiums: an empirical analysis on the UK, 1972–2002’, Journal of Economic Issues, 47(4), pp. 959–82.CrossRefGoogle Scholar
Penrose, E. (1959), The Theory of the Growth of the Firm, Oxford: Oxford University Press.Google Scholar
Price, R. and Bain, G. (1983), ‘Union growth in Britain: retrospect and prospect’, British Journal of Industrial Relations, 21(1), pp. 46–68.CrossRefGoogle Scholar
Restuccia, D. and Rogerson, R. (2008), ‘Policy distortions and aggregate productivity with heterogeneous establishments’, Review of Economic Dynamics, 11(4), pp. 707–20.CrossRefGoogle Scholar
Riley, R., Rincon-Aznar, A. and Samek, L. (2018), ‘Below the aggregate: a sectoral account of the UK productivity puzzle’, ESCoE Discussion Paper 2018–06, Economic Statistics Centre of Excellence.Google Scholar
Rincon-Aznar, A., Forth, J., Mason, G., O'Mahony, M. and Bernini, M. (2015), UK Skills and Productivity in an International Context, BIS Research Paper, London, Department for Business, Innovation & Skills, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/486500/BIS-15-704-UK-skills-and-productivity-in-an-international_context.pdf.Google Scholar
Schwörer, T. (2013), ‘Offshoring, domestic outsourcing and productivity: evidence for a number of European countries’, Review of World Economics, 149(1), pp. 131–49.CrossRefGoogle Scholar
Sianesi, B. and Van Reenen, J. (2003), ‘The returns to education: macroeconomics’, Journal of Economic Surveys, 17(2), pp. 157–200.CrossRefGoogle Scholar
Sudit, E. and Finger, N. (1981), ‘Methodological issues in aggregate productivity analysis’, in Dogramaci, A. and Adam, N. (eds), Aggregate and Industry-Level Productivity Analyses, pp. 7–30, Dordrecht: Springer Netherlands.CrossRefGoogle Scholar
Teece, D. and Pisano, G. (1998), ‘The dynamic capabilities of firms: an introduction’, in Dosi, G., Teece, D. and Chytry, J. (eds), Technology, Organization, and Competitiveness. Perspectives on Industrial and Corporate Change, pp. 193–213, Oxford: Oxford University Press.CrossRefGoogle Scholar
Van Ark, B., Hao, J., Corrado, C. and Hulten, C. (2009), ‘Measuring intangible capital and its contribution to economic growth in Europe’, EIB Papers, 14(1), pp. 62–93.Google Scholar
Van Biesebroeck, J., Yu, E. and Chen, S. (2016), ‘The impact of trade promotion services on Canadian exporter performance’, Canadian Journal of Economics/Revue Canadienne d'Economique, 48(4), pp. 1481–512.Google Scholar
Van Reenen, J. (2013), ‘Productivity under the 1997–2010 Labour government’, Oxford Review of Economic Policy, 29(1), pp. 113–41.CrossRefGoogle Scholar
Wagner, J. (2012), ‘International trade and firm performance: a survey of empirical studies since 2006’, Review of World Economics, 148(2), pp. 235–67.CrossRefGoogle Scholar
Wright, C. and Brown, W. (2014), ‘From center stage to bit player: trade unions and the British Economy’, The Singapore Economic Review, 59(04), pp. 1450030–1450001–1450030–1450020.CrossRefGoogle Scholar
Supplementary material: File

Harris and Moffat Supplementary Material

Harris and Moffat Supplementary Material

Download Harris and Moffat Supplementary Material(File)
File 135.9 KB