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Business Insider UK:
Why I'm not worried about the scariest chart for the UK economy

29 January 2015

As the economy recovers, wages should rise and the relative cost of capital to firms should fall, which would increase the appeal of investing in productivity-enhancing technology. This, at least, is what Professors Joao Paulo Pessoa and John Van Reenen argue in a paper published in June 2013: ''The fall in the price of labour coupled with the rise in the cost of capital has meant a fall in the capital to labour ratio which means that labour productivity falls substantially...What this means is that the UK economy is not fundamentally the victim of a large supply side shock, but rather a very severe demand side shock.''

This article was published online by Business Insider UK on January 29, 2015
Link to article here

Related publications
The UK productivity and jobs puzzle: does the answer lie in wage flexibility?, Joao Paulo Pessoa and John Van Reenen, The Economic Journal, Volume 124, Issue 576, May 2014
'The UK Productivity and Jobs Puzzle: Does the Answer Lie in Labour Market Flexibility?', Joao Paulo Pessoa and John Van Reenen, Centre for Economic Performance Special Paper No.31, June 2013 Link here

Related links
Joao Paulo Pessoa webpage
John Van Reenen webpage
Productivity and Innovation Programme webpage

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