Discussion paper

DP315 The Thatcher Miracle?

Since 1979 productivity growth in Britain has improved markedly compared with Europe. The turnaround in productivity growth has two main causes. The British economy was subjected to a far more severe contraction of demand in 1980-81 than any other country. This led to a new realism, which was sustained by the legal changes in trade union power. Since 1979 there has been a worsening in the trade-off between unemployment and inflation. The poor unemployment/inflation trade-off is due to the neglect of skill training and education (causing skill shortages) and to the build-up of long-term unemployment (which does little to restrain inflation).

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Citation

Nickell, S and R Layard (1989), ‘DP315 The Thatcher Miracle?‘, CEPR Discussion Paper No. 315. CEPR Press, Paris & London. https://cepr.org/publications/dp315