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

Oulton, Nicholas ORCID: 0000-0002-1595-7732 (2018) The UK (and Western) productivity puzzle: does Arthur Lewis hold the key? CFM Discussion Paper Series (CFM-DP2018-09). Centre For Macroeconomics, London School of Economics and Political Science, London, UK.

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Abstract

I propose a new explanation for the UK productivity puzzle. I graft the Lewis (1954) model onto a standard Solow growth model. What I call 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. I also argue that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. The predictions of the neoLewis model are tested on data for 23 advanced countries and also on a larger sample of 52 countries and find support.

Item Type:	Monograph (Discussion Paper)
Additional Information:	© 2018 Centre for Macroeconomics
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:	10 Apr 2018 09:44
Last Modified:	11 Dec 2024 19:27
URI:	http://eprints.lse.ac.uk/id/eprint/87394

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