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The UK (and Western) productivity puzzle: does Arthur Lewis hold the key?

Oulton, Nicholas (2019) The UK (and Western) productivity puzzle: does Arthur Lewis hold the key? International Productivity Monitor, 36. pp. 110-141. ISSN 1492-9759

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Abstract

A new explanation for the UK and developed world productivity puzzle is proposed which grafts the Lewis (1954) model onto a standard Solow growth model. What is called here the neo-Lewis model is identical to the Solow model in good times. But in bad times foreign demand for a country’s exports is constrained below potential supply. This makes labour productivity growth depend negatively on the growth of labour input and positively on the growth of export demand.The predictions of the neo-Lewis model are tested on data for 23 countries (20 EU and 3 non-EU) and find support. It is also argued that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. This proposition also finds support when tested on a larger sample of 52 countries

Item Type: Article
Official URL: http://www.csls.ca/ipm.asp
Additional Information: © 2019 The Author
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
Date Deposited: 28 Sep 2020 14:57
Last Modified: 28 Sep 2020 23:36
URI: http://eprints.lse.ac.uk/id/eprint/106643

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