UK Trade Performance
Innovative measures

The improvements in the UK's economic performance of the mid- 1980s recently fizzled out as the economy again encountered the familiar post-war problems of trade deficits and excessive inflation. In Discussion Paper No. 487, Research Fellow Christine Greenhalgh, Paul Taylor and Rob Wilson assess the role of innovations in determining both net exports and export prices, using cointegration techniques on annual time-series data for 36 industry groups covering manufactures and services. They establish the existence of significant time-series relationships between innovation and trade performance. They obtain alternative econometric estimates of these relationships for 24 manufacturing industries, using patents rather than innovations as indicators of scientific advance and improved product quality. Patents provide a measure of the UK's relative technological performance, but for a smaller range of economic activities.

Their empirical findings support the view that successful R&D (which may raise product quality or reduce production costs) and good industrial relations (which improve the reliability of supply) have quantitatively significant impacts on the balance of trade for a variety of industries and services.

Dr Greenhalgh presented the results of this paper at a lunchtime meeting on 10 December, which was reported more fully in issue no. 42 of the Bulletin.

Innovation and Export Volumes and Prices: A Disaggregated Study
Christine Greenhalgh, Paul Taylor and Rob Wilson

Discussion Paper No. 487, December 1990 (IT)