In the last two questions you are asked which government policies are best suited to help the UK emerge from its productivity growth slowdown. Question 3 asks for your most preferred policy option, while question 4 asks for your second choice. You may use the comment section to outline specific policy recommendations.
Question 3: Which of the following policies would best help improve private sector productivity?
Answer:
Investments in human capital including education and job retraining
Confidence level:
Confident
Comment:
Although I do think the productivity decline may have been driven by low demand, I don't think it's possible at this point to resolve the crisis through pure demand-side measures. I think the policies should focus more on increasing the UK economy's long run potential as a producer of high-skilled goods on the technological frontier. The only way to boost capacities and reduce inequalities is by preparing the workforce to these emerging industries.
Question 2: Which of the following was the second most important cause for the slowdown in UK productivity growth?
Answer:
Productivity mis-measurement
Confidence level:
Confident
Comment:
See above. In addition, productiivty is particularly difficult to measure in the financial sector and the shock to productivity in the crisis was a direct hit to this sector. Further, the sectoral breakdown of the productivity slowdown does appear to be skewed towards this sector. It's very likely that the two combined to show a measured productivity decline that doesn't correspond to any drop in real productivity.
Question 1: Which of the following was the most important cause for the slowdown in UK productivity growth?
Answer:
Low demand (including due to the financial crisis, austerity policies, or Brexit)
Confidence level:
Not confident
Comment:
The UK productivity slowdown pretty much coincides with the global financial crisis. There is growing evidence and theoretical foundations to the idea that low aggregate demand could lead to lower (measured) productivity either through scale effects or through unobserved capacity utilization.
Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?
The Bank of England has an inflation target. Inflationary pressures are starting to mount and it is the Bank's responsibility to respond to them. I agree, however, that the outlook is sufficiently uncertain that taking a gradual approach to interest rate increases is advisable.
It is true that the (unconditional) correlation between inflation and employment has weakened, but I have not yet seen persuasive evidence that this implies a structural flattening of the Phillips Curve, nor a good explanation for why this may have happened. I therefore trust basic price theory, which suggests that wages (and therefore prices) will eventually increase if labour market tightness persists.
The Phillips Curve was never a causal relationship, but rather a correlation that should hold empirically as long as the majority of price variance is due variation in aggregate demand. When aggregate supply shocks are dominant (as in the 1970s) this relationship reverses. Alternatively, if central banks successfully target inflation and/or inflation expectations are strongly anchored, we’d expect to see a zero correlation between inflation and employment, as is the case today.
The CFM surveys informs the public about the views held by prominent economists based in Europe on important macroeconomic and public policy questions. Some surveys focus specifically on the UK economy (as the CFM is a UK research centre), but surveys can in principle focus on any macroeconomic question for any region. The surveys shed light on the extent to which there is agreement or disagreement among these experts. An important motivation for the survey is to give a more comprehensive overview of the beliefs held by economists and in particular to include the views of those economists whose opinions are not frequently heard in public debates.
Questions mainly focus on macroeconomic and public policy topics. Although there are some questions that focus specifically on the UK economy, the setup of the survey is much broader and considers questions related to other countries/regions and also considers questions not tied to a specific economy.
The surveys are done in collaboration with the Centre for Economic Policy Research (CEPR).
The UK Productivity Puzzle
In the last two questions you are asked which government policies are best suited to help the UK emerge from its productivity growth slowdown. Question 3 asks for your most preferred policy option, while question 4 asks for your second choice. You may use the comment section to outline specific policy recommendations.
Question 3: Which of the following policies would best help improve private sector productivity?
Question 2: Which of the following was the second most important cause for the slowdown in UK productivity growth?
Question 1: Which of the following was the most important cause for the slowdown in UK productivity growth?
Labour Markets and Monetary Policy
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Question 2: Do you agree that, in a period of great uncertainty and after a prolonged period of weak real wage growth, monetary policy makers can afford to wait for greater certainty about real wage developments and building inflationary pressure before raising interest rates?
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Question 1: Do you agree that a strong labour market is a good indicator of building inflationary pressure?
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