Macroeconomic theory clearly suggests that at the zero lower bound, fiscal contraction will reduce output and slow any recovery. Yet in 2010 the focus of fiscal policy in many countries switched from supporting activity to reducing debt, despite the fact that the recovery from recession often appeared weak. While high levels of public debt can explain this switch in some countries, it does not provide a satisfactory account in others. In addition, the possibility of using balanced budget fiscal expansion or tax switches that bring forward spending remain largely unexplored. This paper suggests that policy has been influenced by an opposition to countercyclical fiscal policy which has ideological roots.

The UK's economic performance, like that in many industrial economies, worsened in the 1970s after about twenty years of relatively stable and strong growth and low inflation. This article investigates to what extent this worsening in performance can be attributed to factors outside the UK's control—to world recession—and how far it was the result of domestic policies. Simulations of the NIESR model suggest that about half of the slackening in output growth can be explained by these two sets of factors. Adverse trends in import and export behaviour appear the major behavioural impediment to faster economic growth.

This paper briefly reviews international perspectives on quality in mixed economies of childcare in a number of countries; in the UK, Canada, Australia, New Zealand, the USA, the Netherlands and South Africa. In all these countries the private market is dominant; that is, the Government takes the view that childcare is best provided by private for-profit or non-profit entrepreneurs, even if part-subsidised by the state through tax credits or some other form of subsidy. This contrasts with countries like France where for-profit care is simply not permitted, and the state provides universal services through the école maternelle system.

Government policy to increase substantially the amount of vocational training and education available to school-leavers in this country raises the issue of how much and what kind of training is provided elsewhere. This article describes the training given in Britain and Germany in five of the more popular occupations: mechanical fitter, electrician, construction worker, office worker and retailing. Comparisons are made of the scope of the syllabus, and the standard reached at final tests. One of the important differences is the greater emphasis on practical (in contrast to theoretical or written) tests in all these occupations in Germany, which are carried out under examination conditions. It also appears that a greater proportion have reached basic and tested standards in mathematics at school; this provides a firmer basis for subsequent vocational instruction. The gap between the two countries in training standards and numbers of trainees is particularly marked for the two occupations catering mainly for female entrants-office workers and retailing. Shortcomings in Britain's industrial performance have often centred as much on delivery delays and poor ‘progress chasing’—which require responsible and competent office personnel—as on technical faults. These comparisons indicate the scope for very substantial advances in both the quantity and the quality of training in this country.

The external shocks emphasised by the standard Optimum Currency Area approach (i.e. shocks to exports) have surprisingly little influence on employment and unemployment in most member countries of the European Union (EU) whether or not exchange rates are fixed. Short-run exchange-rate variability (but not the level of the exchange rate) seems to have a negative impact on employment.

It is often claimed that a high degree of international labour mobility is a condition for a monetary union. However, what matters for the Optimum Currency Area approach is the difference between inter-regional and inter-national labour mobil ity and not the level of the latter. Recent data show that international labour mobility in Europe is of the same order of magnitude as inter-regional labour mobility within member countries and that, the latter seems to be influenced by the housing market. EMU is thus unlikely to significantly worsen the problems that arise through the low mobility of labour in Europe.

This article uses the ARD, the new longitudinal database of the Census of Production, to analyse productivity at the establishment level in the two cycles of 1973–9 and 1979–89. Contrary to a commonly held view, closures did not play a major role in accounting for productivity growth in 1979–89. Establishments which shut had lower productivity than survivors but the exits were replaced by entrants whose productivity was also lower. Hence most of productivity growth was due to growth within survivors. Most productivity growth occurred in establishments which reduced employment. But despite an overall fall of a quarter in employment, 16 per cent of productivity growth occurred in establishments which expanded employment. The main difference between 1973–9 and 1979–89 was in the productivity growth rate amongst survivors. In 1973–9, it was negative overall and over half of employment in 1973 was in establishments where productivity subsequently fell.

This article presents the results of a benchmark comparison of the relative level of manufacturing productivity in the United Kingdom and the United States for 1987. It shows value added per hour worked in the UK at 58 per cent of the corresponding level in the United States. The UK appears to show relatively high productivity levels in basic goods industries, including textiles, chemicals and basic metals. The benchmark results are extrapolated backwards to 1968 and forwards to 1990, showing a narrowing of some ten percentage points of the productivity gap between the two countries. It is also shown that differences in capital intensity account for only a small part of the productivity gap.

One of the key issues facing the UK in the wake of the advisory referendum result to leave the European Union is the precise nature of its relationship with the European Union. At one extreme would be continued membership in the European Economic Area, including membership in the single market. Other options would be either no free trade agreement (FTA) with the EU at all or a less comprehensive FTA which stops short of single market membership. This paper compares the ability of EEA membership and less comprehensive FTAs to generate trade in goods and services. We investigate this question using empirical gravity model methodology and the most recent available data from 42 countries. We use recently developed econometric methods to deal with observations of zero trade flows and issues connected with endogeneity. The main finding is that while EEA membership is associated with substantial and statistically significant increases in bilateral services trade flows, membership in less comprehensive FTAs is not associated with any significant increase in bilateral services trade. For goods, EEA membership is associated with larger bilateral trade flows than are less comprehensive FTAs. These results suggest that it might be difficult to replace, on an exit from a European Union, lost trade flows with the EU by means of shallower FTAs with the EU or with third countries.

This paper considers the agenda for UK trade negotiations over the post-Brexit period. There are several groups of countries that will need to be dealt with and we consider the priorities among them. Negotiations with the WTO and the EU are the most important and the most pressing in time, and should be pursued simultaneously. On the former, the UK must try quickly to establish its independent WTO status, which will be greatly facilitated by minimising the changes it proposes to its tariffs schedules. On the EU the UK needs to consider the choices between remaining in the customs union, creating an FTA with the EU and maintaining the ‘regulatory union’ that is the European Economic Area (EEA). Only when relations with the EU and WTO are clear will it be feasible to negotiate trade deals of various sorts with other countries, ranging from those with which we already have deals via the EU to those that currently trade with us on ‘WTO rules’. All of this takes time and we argue that it may be worth pursuing transitional arrangements to extend certain current trading arrangements a few years beyond Brexit in order to make time for serious negotiations.

In England, teacher shortages have worsened in recent years and one contributor is the declining rates of retention among newly qualified teachers (NQTs). We employ a method developed in the health-statistics literature to identify schools that both recruit an unusually high level of NQTs and lose an unusually high level of NQTs from the profession. We show that this small group of schools, which are likely characterised by poor working conditions, are responsible for a disproportionately large amount of attrition from the teaching profession. This has a material effect on overall teacher shortages and comes at a high cost to taxpayers. Policy solutions, including improving the flow of information to NQTs to help them avoid such schools, are discussed

Based on evidence gathered from a newly built large macroeconomic dataset (MD) for the UK, labelled UK-MD and comparable to similar datasets for the United States and Canada, it seems the most promising avenue for forecasting during the pandemic is to allow for general forms of nonlinearity by using machine learning (ML) methods. But not all nonlinear ML methods are alike. For instance, some do not allow to extrapolate (like regular trees and forests) and some do (when complemented with linear dynamic components). This and other crucial aspects of ML-based forecasting in unprecedented times are studied in an extensive pseudo-out-of-sample exercise.

This article analyses the properties of five leading macroeconometric models of the UK economy, as revealed in four simulation experiments. These are carried out in a common operating environment that reflects the broad objectives of current policy — sound public finances and low inflation — by using feedback rules for income tax and interest rates. Developments in the structure of the models as revealed by the series of such exercises carried out during the lifetime of the ESRC Macroeconomic Modelling Bureau (1983–99) are described. The development of the research methods through which models' properties were elucidated and analysed is also reviewed.

This paper considers the relative importance of investment and productivity in the growth of the G7 countries during the period 1960-89. Investment is the commitment of resources in the expectation of future returns to the investor. Productivity is identified with 'spillovers' of benefits that do not provide incentives for investment. The great preponderance of growth in the US and Canada is due to investment. Investment is more important than productivity for all of the G7 countries, except France, after 1973. Patterns of economic growth have converged for the G7 countries, but important differences remain.

The recent increase in Chinese house prices has led to concerns that China is vulnerable to asset price shocks. In this paper, we apply recently developed recursive unit root tests to spot the beginning and the end of potential speculative bubbles in Chinese house price cycles. Overall, we find that except for 2009–10 actual house prices are not significantly disconnected from fundamentals. Thus, the evidence for speculative house price bubbles in China is in general weak.

The author examines the relationship between employee involvement (EI) and small firms‘ financial performance using statistical analyses of establishment-level data from the 1990 Workplace Industrial Relations Survey. The author finds EI practices and EI combinations which ‘work’ for small-firm establishments are very different from those that work for large-firm establishments. The least bureaucratic and least costly EI methods have the potential to benefit small firms most. Whether they actually do so depends on the array of other EI and non-EI practices in operation: an inappropriate configuration can have a negative effect on performance. The findings take account of factors associated with being an ‘EI firm’.

The British people voted for Brexit for a variety of reasons. A literature is emerging that seeks to explain the outcome using the increasing amount of aggregate and individual data being generated. Less often considered is the impact those factors that shaped the referendum outcome might continue to exert on the debate about the UK's future relationship with the EU. We argue that they will continue to weigh on political debates. The continued resonance of the Leave message militates against anything but what has come to be known as a ‘hard Brexit’.

In many industrial countries regular surveys are published in which either firms or consumers are asked whether they expect some economic variable, like prices for example, to rise or fail. This survey information has been used for many years as an aid to short-term forecasting. Recently there has been a renewed interest in using this data for a rather different purpose: as a measure of firms or consumers' average expectations.

This paper describes the diffusion of computer use among jobs in Britain, and shows that the technology is having notable effects on the labour market. By 2006 three in four jobs entailed job-holders using computers, while for two in four jobs computer use was essential. Computing skills have a significant impact on pay but, in 2006, much of this effect is interactive with what we term ‘influence skills’. The average effect of a unit increase in the Computing Skills index (which ranges from 0 to 4) is to raise pay by an estimated 5.3 per cent and 6.0 per cent for men and women respectively. For men there is an additional 19.2 per cent boost to pay in establishments where at least three quarters of workers are working with computers, compared to establishments where no one uses computers. These effects are greater for those people in jobs with above-average influence skills requirements. Our estimates allow for education, a large number of other generic skills and other conventional controls, which makes them more robust to the critique that they are overestimates because they might suffer from omitted skill bias. IV estimates show only small differences from the OLS estimates. We also find that the direct and interactive effects of computer skills and influence skills have risen over the decade, indicating increased scarcity.

In housing affordability levels and volatility, there could hardly be a greater contrast than between the UK and Germany. Differences in history, institutions and policies are explored in this paper. Residential housing supply has been far more expansionary in Germany and mortgage credit more tightly regulated. A sensibly regulated rental market and stable German house prices have combined to leave the rental sector with over half of tenures. Policy failures in the UK have resulted in widening intergenerational inequality, increased social exclusion, adversely affected productivity and growth and raised the risk of financial instability. Policy lessons are drawn for the UK, which go far beyond the remit of the immediately responsible Ministry of Housing, Communities and Local Government.