Coyle, D., McHale, J., Bournakis, I. and Mei, J. 2024. Recent Trends in Firm-Level Total Factor Productivity in the United Kingdom: New Measures, New Puzzles. Economica.
| Title | Recent Trends in Firm-Level Total Factor Productivity in the United Kingdom: New Measures, New Puzzles |
|---|---|
| Type | Journal article |
| Authors | Coyle, D., McHale, J., Bournakis, I. and Mei, J. |
| Abstract | Understanding the poor productivity performance of the UK economy since the financial crisis is complicated by the well-known challenges in estimating total factor productivity (TFP) using only revenue data. We develop a structural framework to infer quality-adjusted TFP from an estimated firm-level revenue function. We use microdata for two sectors previously identified as being significant contributors to the UK’s productivity growth slowdown – manufacturing and ICT – from 2008 to 2019. The revenue function is estimated using the Blundell-Bond System GMM estimator. We also use an alternative cost-shares approach to identifying and measuring TFP. For both methods, we find an overall fall in TFP levels in manufacturing and a rise in ICT. We find a striking decline of between 13 and 18 percent in the level of within-firm manufacturing TFP, and of between 11 and 16 percent in ICT, although with reallocation effects differing between the two sectors. The finding of declining within-firm TFP is robust although the magnitude varies between methods. We discuss a possible explanation for this extended UK productivity puzzle based on the relative underperformance of UK firms in international markets. |
| Keywords | Productivity |
| Quality | |
| Manufacturing | |
| ICT | |
| Journal | Economica |
| ISSN | 0013-0427 |
| 1468-0335 | |
| Year | 2024 |
| Publisher | Wiley |
| Accepted author manuscript | File Access Level Open (open metadata and files) |