In the wake of the financial crisis output fell dramatically while inflation remained above its target and productivity collapsed relative to its previous trend. The fall in productivity relative to trend was particularly pronounced within the service sector, and then most particularly in...

The behaviour of labour productivity in the United Kingdom since the onset of the recession in early 2008 constitutes a puzzle. Over four years after the recession began labour productivity is still below its previous peak level. This paper considers the hypothesis that economic capacity can be...