Investment, capital and foreign ownership in UK manufacturing

Pub. Date
03 August, 1998
Pub. Type

This paper studies physical investment in UK manufacturing from the viewpoint of the individual establishment, i.e. business or plant. It uses the new longitudinal database of the Census of Production, the ARD. I construct a sample of 1,752 establishments which survived over 1973-93 and estimate their capital stocks. These survivors accounted for about a third of manufacturing employment. From production function estimates, the neo-classical view that the elasticity of output with respect to capital is equal to capital's share cannot be rejected. Capital intensity varies widely across establishments even in the same SIC80 Class. It is 50% higher in foreign- owned establishments which are also more human capital intensive. Value added per worker is 38% higher in foreign-owned establishments. Human and physical capital intensity differences are a significant determinant of productivity gaps between establishments. Even after allowing for their higher capital intensity, US-owned (but not other foreign-owned) establishments have an additional productivity advantage of between