Tracing Productivity Growth Channels in the UK

IMF Working Papers, November 12, 2021

Source details

Title: Tracing Productivity Growth Channels in the UK
Authors: Daniel Garcia-Macia, Julia Korosteleva
Publication date: November 12, 2021
Type: IMF Working Paper (Working Paper No. 2021/273)
Summary of research question: What drove the UK productivity slowdown post-GFC, and how is the post-Covid recovery expected to differ?

Dominant innovation sources by period:
- Pre-GFC decade: improvements by incumbent firms on their own products were the dominant innovation source.
- Post-GFC: creation of new varieties by entrants took a leading role.
- Covid recovery (survey data): creative destruction (innovation replacing other firms’ products) is expected to gain importance.
Implication for observed productivity dynamics:
- Shift from incumbent-driven improvements to entrant-driven variety creation aligns with the post-GFC slowdown pattern described.
- Expected rise in creative destruction during the Covid recovery suggests a different reallocation pattern compared with post-GFC.

Growth policies should:
- Facilitate labor and capital reallocation across firms.
- Complement R&D support with measures that ease firm entry, exit, and resource reallocation to allow creative destruction to operate effectively.

Subject: Employment, Job creation, Job destruction, Labor, Production, Productivity, Total factor productivity
Keywords: creative destruction, economic growth, Employment, exit rate, GFC decade, Global, innovation, innovation source, Job creation, Job destruction, leading role, Productivity, sources of TFP growth, Total factor productivity, UK market economy, UK productivity slowdown post-GFC