Assets and Liabilities and Scottish Independence

Scottish independence implies an economic future that is different from remaining in the United Kingdom. The economic debate largely comes down to whether this would leave Scots better or worse off. By most measures, Scotland’s current economic standing is very similar to that of an average UK region. Output per head, income and unemployment are almost all exactly the same as the average UK region. This is not surprising given the economic and social integration and shared institutions, and is consistent with the idea of conditional convergence. This suggests that after controlling for differences in institutions and other characteristics (so-called ‘initial conditions’), countries tend to converge to similar levels of income.[1] However, if Scotland becomes an independent nation, some of the shared UK assets, liabilities and institutions would need to be divided-up. This would change the ‘initial conditions’ for Scotland and the rest of the UK and therefore we would be likely to see a different economic future for both regions.