Martin Ellison's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

Causes for Weak Long-Run UK Growth

Question 2: Which of the following policies would do the most to boost UK GDP in the medium term (over the next decade)?

Answer:
Public investments and R&D subsidies
Confidence level:
Confident
Comment:
Every first year undergraduate is taught that mature economies grow mostly through technological progress. The best returns are therefore likely to be found in policy measures that improve productivity and innovation, so my top two options are public investments and R&D subsidies or worker retraining. Boosting labour market participation may work in the short run but is a “sticking plaster” solution that misses the steady decline in UK productivity experienced over the last decade or so. If people have genuinely left the labour market because of long-covid health problems then that is a sunk cost to which we must adjust – the answer is not to try and entice such people back into the labour market.

Question 1: Which of the following will be the most important constraint on UK potential output in 2023, relative to its pre-2019 trend?

Answer:
Labor force participation
Confidence level:
Confident
Comment:
The UK is in the middle of a perfect storm, although a lot of it is of our own making. On potential output in 2023, we will be constrained by all of labour market participation, oil and energy prices, Brexit, policy uncertainty and workforce skills. It’s difficult to identify one most important factor, but for me the lack of workforce skills dominates as it is an important driver of the other factors too. The weak productivity of a low-skilled workforce is reflected in low wages, which directly impacts on decisions to leave the labour market. The UK also lacks the labour market skills needed to upgraded the energy-efficiency of its housing stock, so we are more exposed to energy prices than we should be, even setting aside the limited political appetite to support home improvements.

Prospects for Euro Area Inflation in 2023

Question 3:  Under its current policy trajectory, with rates peaking at 3.5%, which of the following is most likely?

Answer:
ECB policy interest rates will be too high in 2023.
Confidence level:
Not confident

Question 2: Relative to market forecasts of the ECB’s MRO rate peaking at 3.5%, which of the following is more likely during 2023?

Answer:
The MRO rate will peak at 3.5%
Confidence level:
Not confident

Question 1: How likely is it that peak headline euro area inflation is behind us?

Answer:
Likely
Confidence level:
Not confident

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