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Title: The UK's Great Demand and Supply Recession

Author(s): Nicholas Jacob and Giordano Mion

Publication Date: December 2020

Keyword(s): demand, great recession, prices, Revenue TFP, Total factor productivity (TFP) and United Kingdom

Programme Area(s): Industrial Organization, International Trade and Regional Economics and Macroeconomics and Growth

Abstract: We revisit UK's poor productivity performance since the Great Recession by means of both a suitable theoretical framework and firm-level prices and quantities data for detailed products allowing us to both measure demand, and its changes over time, and distinguish between quantity total factor productivity (TFP-Q), i.e., the capacity to turn inputs into more physical output (number of shirts, liters of beer), and what we call revenue total factor productivity (TFP-R), i.e., productivity calculated using revenue (or value-added) as a measure of output and so the capacity to turn inputs into more revenue. This in turn allows us to measure how changes in TFP-Q, demand and markups ultimately affected revenue TFP, as well as labour productivity, over the Great Recession. Our findings suggest that the poor UK firms' productivity performance post-recession is due to both a weakening of demand and a decreasing TFP-Q pushing down sales, markups, revenue TFP and labour productivity.

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Bibliographic Reference

Jacob, N and Mion, G. 2020. 'The UK's Great Demand and Supply Recession'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15516