What Have Two Decades of British Economic Reform Delivered in Terms of Productivity Growth?

The UK economy has undergone significant market reforms over the last two decades. A key question for productivity researchers is the impact of these reforms on productivity growth. In this article, Richard B. Freeman of the London School of Economics, Harvard University and the NBER and David Card of the University of California at Berkeley and the NBER examine trends in productivity growth in Britain and other major developed countries and estimate the impact of British economic reforms on British performance. Freeman and Card find that developments in the UK economy cannot be readily explained by standard macro-economic changes in labour or capital. They note that economic reforms were more important in the UK than in other countries and that the UK after 1979 arrested the nearly century-long trend in economic decline of the UK relative to its historic competitors, France and Germany. They conclude that reforms in the area of union-management relations, privatization, profit and share ownership, and self-employment increased UK productivity growth 0.35 per cent per year over the 1979-1999 period, accounting for one quarter of the pick-up in productivity between the 1960-79 and 1979-1999 periods.