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In Discussion Paper No. 1209, Research Fellow Nicholas Crafts provides an overview of growth in Northern Ireland during the 1950-73 'Golden Age'. The experience is discussed with reference to the endogenous growth literature, in particular the idea of 'endogenous innovation'. A regression analysis of European growth rates shows that Northern Ireland grew much less quickly than might have been expected on the basis of its 1950 real income level and economic structure. The province's performance was worse than that of any other UK region although the UK itself did significantly less well than its European peer group. By comparison with other European countries, Northern Ireland had high physical investment and fairly typical schooling, but disappointing total factor productivity (TFP) growth. Northern Ireland suffered from an accentuated version of general UK problems, such as failures to eliminate inefficient use of labour, weak patenting performance (despite large R&D expenditure) and low skill formation in the work force. These weaknesses were sustained by the incentive structures embedded in British institutions, for example, exposure to hostile takeover threats and the prevalence of multiple unionism in industrial relations. Other aspects were more specific to the province: TFP growth was lower than in the rest of the UK despite higher physical capital investment and the resulting higher growth of the manufacturing capital stock. In addition, Northern Ireland exhibited a large and increasing gap in innovations relative to the rest of the UK, possibly because of the few research activities in the province. Moreover, a policy framework centred on promoting physical capital investment did not effectively address the disadvantages of peripherality in inhibiting endogenous innovation. The Golden Age of Economic Growth: Why did Northern Ireland Miss Out? Nicholas F R Crafts Discussion Paper No. 1209, August 1995 (HR) |