Published on 11 May 2023
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Relative price effects and UK labour productivity growth

Diane Coyle, Jen-Chung Mei and Lucy Hampton explore the role played by relative price changes in the well-documented slowdown in labour productivity growth in the UK.

This working paper explores the role played by relative price changes in the well-documented slowdown in labour productivity growth in the UK. Using two alternative sectoral decomposition frameworks, it isolates the contribution from relative output price changes to aggregate labour productivity growth before and after 2008. It also compares the recent double deflated UK data with the counterfactual of the previous single deflated data to explore the role of input prices at the sector level.

It shows that relative price shifts contribute negatively to aggregate UK labour productivity growth, although to a differing extent depending on the decomposition chosen. It also finds that the shift to double deflation of the data, adjusting input prices separately, makes a large negative contribution in one of the decomposition methods. However, the relative price effects differ between manufacturing and information and communication technology (ICT), with more sensitivity to the choice of single or double-deflated data in the case of ICT.


Diane Coyle 2018

Professor Diane Coyle

Bennett Professor of Public Policy and Co-Director of the Bennett Institute for Public Policy

Professor Coyle co-directs the Institute with Professor Kenny. She is heading research under the progress and productivity themes. Biography Professor Dame Diane Coyle is the Bennett Professor of Public Policy...

Dr Jen-Chung Mei

Dr Jen-Chung Mei is a Lecturer in Economics at Westminster Business School, and a member of the Productivity Institute. He was a Postdoc Research Associate at the Bennett Institute for Public...

Lucy Hampton

Research Assistant

Lucy is a Research Assistant working on the Sectoral Productivity project, which investigates the drivers of productivity in different sectors. Her research interests include the economic impacts of artificial intelligence, research...

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