Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-10T17:40:39.223Z Has data issue: false hasContentIssue false
  • English
  • Français

Investing for Prosperity: Skills, Infrastructure and Innovation

Published online by Cambridge University Press:  26 March 2020

Timothy Besley ,
Miguel Coelho  and
John Van Reenen
Timothy Besley
Affiliation:
London School of Economics
Miguel Coelho*
Affiliation:
Institute for Government
John Van Reenen
Affiliation:
Centre for Economic Performance and London School of Economics
*
E-mail: Miguel.Coelho@instituteforgovernment.org.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

What policies and institutions are needed to sustain long-run growth in the UK? We describe an optimistic story of the UK economy over the past 30 years. From the late 1970s, the UK reversed a century of relative decline in terms of per capita GDP with our main counterparts in the US, France and Germany. A key factor behind this improvement was an array of policy changes including an expansion of higher education and greater competition in product and labour markets. However, major weaknesses with respect to long-run investment in human capital, infrastructure and innovation remain. These are hampered by problems of short-termism and policy risk. We propose a series of radical reforms to address these problems: such as more flexibility in schooling with a new focus on disadvantage; a new architecture for national infrastructure decisions and more competition in banking.

Keywords

UK economyinvestmentproductivitypolicy riskO20O52
Type
Research Articles
Information
National Institute Economic Review , Volume 224 , May 2013 , pp. R1 - R13
Copyright
Copyright © 2013 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This is a summary of the report of the LSE Growth Commission (2013). We would like to thank the other Commissioners and Secretariat from the LSE Growth Commission. Numerous people have given valuable evidence and comments on the report, especially Romesh Vaitilingham, Nigel Rogers, two anonymous referees and the editor. We are grateful to the Economic and Social Research Council and HEIF (Higher Education Innovation Fund) for financial support.

References

Aghion, P.Howitt, P. (1992), ‘A model of growth through creative destruction’, Econometrica, 60, pp. 323–51.Google Scholar
Aghion, P.Howitt, P. (1998), Endogenous Growth Theory, Cambridge, MA, MIT Press.Google Scholar
Allen, R.Burgess, S. (2012), ‘Reforming teacher training’, CMPO Viewpoint.Google Scholar
Atkinson, A.B. (1970), ‘On the measurement of inequality’, Journal of Economic Theory, 2, pp. 244–63.Google Scholar
Atkinson, A.B. (2011), ‘Prosperity and fairness’, mimeo, available at http://tinyurl.com/c7qn3mu.Google Scholar
Bartelsman, E., Haltiwanger, J.Scarpetta, S. (2012), ‘Cross country differences in productivity: the role of allocation and selection’, University of Maryland mimeo (forthcoming American Economic Review).CrossRefGoogle Scholar
Beck, T. (2012), ‘Finance and growth – lessons from the literature and the recent crisis’, Submission to the LSE Growth Commission, available at http://tinyurl.com/d79hz9z.Google Scholar
BIS, Department for Business, Innovation and Skills (2009), Rowlands Review: The Provision of Growth Capital to UK Small and Medium Sized Enterprises, November.Google Scholar
BIS, Department for Business, Innovation and Skills (2010), Financing a Private Sector Recovery, July.Google Scholar
BIS, Department for Business, Innovation and Skills (2012), ‘SME access to external finance’, Department of Business, Innovation, and Skills Economics Paper No.16.Google Scholar
Breedon Review (2012), Boosting Finance Options for Business, March.Google Scholar
Burgess, S., Greaves, E., and Vignoles, A. (2009), ‘Parental choice of primary school in England: what ‘type’ of school do parents choose?’, Centre for Market and Public Organisation Working Paper Series No. 09/224.Google Scholar
Canales, R.Nanda, R. (2012), ‘A darker side of decentralised banks: market power and credit rationing in SME lending’, Journal of Financial Economics, 105, pp. 353–66.Google Scholar
Carbo-Valverde, S., Rodriguez-Fernandez, F.Udell, G.F. (2009), ‘Bank market power and SME financing constraints’, Review of Finance, 13 (2), pp. 309–40.Google Scholar
Card, D., Blundell, R.Freeman, R. (2004), Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000, National Bureau of Economic Research.CrossRefGoogle Scholar
Competition Commission (2002), The Supply of Banking Services by Clearing Banks to Small and Medium Sized Enterprises, March.Google Scholar
Corry, D., Valero, A.Van Reenen, J. (2011), ‘UK economic performance since 1997: growth, productivity and jobs’, Centre for Economic Performance Special Paper No. 24.Google Scholar
Crafts, N. (2012), ‘British relative economic decline revisited: the role of competition’, Explorations in Economic History, 49 (1), pp. 17–29.Google Scholar
Cruickshank (2000), Report into Competition in UK Banking, March.Google Scholar
Eddington Review (2006), The Eddington Transport Study: The Case for Action – Sir Rod Eddington's Advice to Government, December.Google Scholar
Fischer, K.-H. (2000), Acquisition of Information in Loan Markets and Bank Market Power – An Empirical Investigation, Johann Wolfgang Goethe University.CrossRefGoogle Scholar
Griffith, R., Redding, S.Van Reenen, J. (2004), ‘Mapping the two faces of R&D: productivity growth in a panel of OECD industries’, Review of Economics and Statistics, 86 (4), pp. 883–95.Google Scholar
Haldane, A.G.Davies, R. (2011), ‘The short long’, speech delivered at the 29th Société Universitaire Européene de Recherches Financières Colloquium ‘New Paradigms in Money and Finance?’, Brussels, May.Google Scholar
Hanushek, E.A.Rivkin, S.G. (2006), ‘Teacher quality’, in Handbook of the Economics of Education, Volume 2, Amsterdam: North Holland, pp. 1052–78.Google Scholar
Hanushek, E.A.Rivkin, S.G. (2010), ‘Generalizations about using value-added measure of teacher quality’, American Economic Review, May.CrossRefGoogle Scholar
Helm, D. (2010), ‘Infrastructure and infrastructure finance: the role of the government and the private sector’, European Investment Bank Papers, 25 (2), pp. 8–27.Google Scholar
Hutchings, M., Greenwood, C., Hollingworth, S., Mansaray, A., Rose, A., Minty, S., and Glass, K. (2012), Evaluation of the City Challenge programme, Department for Education, Research Report DFE-RR215.Google Scholar
Independent Commission on Banking (2011), Final Report, September.Google Scholar
Jamison, M.A., Lynne, H.Berg, S. (2005), ‘Measuring and mitigating regulatory risk in private infrastructure investment’, The Electricity Journal, 18 (6), pp. 36–45.Google Scholar
Jenkins, S.P. (2012), ‘Distributionally-sensitive measures of national income and income growth’, mimeo, available at http://tinyurl.com/cjdavt9.Google Scholar
Kay, J. (2012), The Kay Review of UK Equity Markets and Long-Term Decision Making, Final Report, July.Google Scholar
LSE Growth Commission (2013), Investing in Prosperity: Skills, Infrastructure and Innovation, London School of Economics and Political Science, London, UK.Google Scholar
Lindley, J.Machin, S. (2012), ‘Wage inequality in the labour years’, forthcoming in Oxford Review of Economic Policy.CrossRefGoogle Scholar
Machin, S.Vernoit, J. (2010), ‘Academy schools: who benefits?’, Centre for Economic Performance, paper no. CEPCP325, London School of Economics and Political Science.Google Scholar
Macmillan Committee (1931), Report on the Committee on Finance and Industry, June.Google Scholar
Memmel, C., Schmieder, C.Stein, I. (2007), ‘Relationship lending: empirical evidence for Germany’, Deutsche Bundesbank Discussion Paper Series 2: Banking and Financial Studies No. 14.Google Scholar
NESTA (2012), Plan I: The Case for Innovation-led Growth, National Endowment for Science, Technology and the Arts, London.Google Scholar
Neuberger, D., Pedergnana, M.Räthke-Döppner, S. (2008), ‘Concentration of banking relationships in Switzerland: the result of firm structure or banking market structure?’, Journal of Financial Services Research, 33 (2), pp. 101–26.Google Scholar
Newbery, D. (2012), ‘Energy and infrastructure’, submission to the LSE Growth Commission, available at http://tinyurl.com/c8qtahl.Google Scholar
OECD (2012a), Going for Growth, Paris, Organisation for Economic Cooperation and Development.Google Scholar
OECD (2012b), Financing SMEs and Entrepreneurs 2012, Paris, Organisation for Economic Cooperation and Development.Google Scholar
Ofgem (2012), Electricity Capacity Assessment, Office of the Gas and Electricity Markets, October.Google Scholar
OFT (2006), Survey of SME Banking, Office of Fair Trading, July.Google Scholar
OFT (2010), Review of Barriers to Entry, Expansion and Exit in Retail Banking, Office of Fair Trading, November.Google Scholar
Ogura, Y. (2007), ‘Lending competition, relationship banking, and credit availability for entrepreneurs’, Research Institute of Economy, Trade and Industry Working Paper No. 07-E-036.Google Scholar
Ogura, Y. (2010), ‘Interbank competition and information production: evidence from the interest rate difference’, Journal of Financial Intermediation, 19 (2), pp. 279–304.Google Scholar
Oulton, N. (2012), ‘Hooray for GDP!’, Centre for Economic Performance occasional papers, CEPOP30, London School of Economics and Political Science.Google Scholar
Oulton, N. (2013), ‘Has the growth of real GDP in the UK been overstated because of mis-measurement of banking output?’, National Institute Economic Review, 224, pp. R59–54.Google Scholar
Petersen, M.Rajan, R. (1995), ‘The effect of credit market competition on lending relationships’, Quarterly Journal of Economics, 110 (2), pp. 407–43.Google Scholar
Presbitero, A.F.Zazzaro, A. (2011), ‘Competition and relationship lending: friends or foes?’, Journal of Financial Intermediation, 20 (3), pp. 387–413.Google Scholar
Rivkin, S.G., Hanushek, E.A.Kain, J.F. (2005), ‘Teachers, schools, and academic achievement’, Econometrica, 73, 2, pp. 417–58.Google Scholar
Romp, W.de Haan, J. (2007), ‘Public capital and economic growth: a critical survey’, Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, 8(s1), pp. 6–52.Google Scholar
Sen, A. (1976), ‘Real national income’, The Review of Economic Studies, 43 (1), pp. 19–39.Google Scholar
Sen, A. (1979), ‘The welfare basis of real income comparisons’, Journal of Economic Literature, 17 (1), pp. 1–45.Google Scholar
Skidelsky, R., Martin, F.Wigstrom, C.W. (2011), Blueprint for a British Investment Bank, Centre for Global Studies, London.Google Scholar
Slater, H., Davies, N.Burgess, S. (2009), ‘Do teachers matter?: measuring the variation in teacher effectiveness in England’, Bristol Centre for Market and Public Organisation, Working Paper no 09/212.Google Scholar
Stiglitz, J., Sen, A., and Fitoussi, J.-P. (2009), Report by the Commission on the Measurement of Economic Performance and Social Progress, available at http://www.stiglitz-sen-fitoussi.fr/en/index.htm.Google Scholar
Strahan, P.E. (2008), ‘Bank structure and lending: what we do and do not know’, in Thakor, A.V.Boot, A. (eds), Handbook of Financial Intermediation and Banking, Elsevier Science.Google Scholar
Tanzi, V.Schuknecht, L. (2000), Public Spending in the 20th Century, Cambridge University Press.CrossRefGoogle Scholar
Van Reenen, John (2011), ‘Wage inequality, technology and trade: 21st century evidence’, Labour Economics, 18 (6), pp. 730–41.Google Scholar