Productivity Dynamics in the Great Stagnation: Evidence from British businesses

Publication date: 30 May 2014 | Publication type: Report | Theme: Trade, Investment & Productivity | NIESR Author(s): Riley, R | External Author(s): Young, G

We investigate labor productivity dynamics amongst British businesses in the wake of the credit crisis of 2007/8. The external restructuring of firms (i.e. changes in market share, firm entry and exit) contributed to a fall in productivity growth relative to trend amongst small businesses in bank dependent industries, consistent with the idea that an adverse credit supply shock caused inefficiencies in resource allocation across firms. But, the major part of the decline in UK productivity growth following the credit crisis was accounted for by a widespread productivity shock within firms, pointing to the importance of other factors in explaining the Great Stagnation.