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Increasing Returns and Externalities in UK Manufacturing: Myth or Reality?

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  • Oulton, Nicholas

Abstract

The author applies the method of R. J. Caballero and R. K. Lyons to industry-level data for U.K. manufacturing. He finds evidence for a positive external effect, arising from the expansion of manufacturing as a whole, but expansion at the sectoral level was found not to generate external effects. Nor was any evidence found for increasing returns that are internal to the industry: here returns appear to be constant. The author argues that external effects at the level of aggregate manufacturing cannot be explained away as due to measurement error or cyclical effects. However, alternative explanations, such as economywide shocks, cannot be totally excluded. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Oulton, Nicholas, 1996. "Increasing Returns and Externalities in UK Manufacturing: Myth or Reality?," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 99-113, March.
  • Handle: RePEc:bla:jindec:v:44:y:1996:i:1:p:99-113
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    Cited by:

    1. Driver, Ciaran & Temple, Paul & Urga, Giovanni, 2006. "Identifying externalities in UK manufacturing using direct estimation of an average cost function," Economics Letters, Elsevier, vol. 92(2), pages 228-233, August.
    2. Bournakis, Ioannis & Christopoulos, Dimitris & Mallick, Sushanta, 2015. "Knowledge Spillovers, Absorptive Capacity and Growth: An Industry-level Analysis for OECD Countries," MPRA Paper 63542, University Library of Munich, Germany.
    3. Nigel Driffield & Max Munday & Annette Roberts, 2002. "Foreign Direct Investment, Transactions Linkages, and the Performance of the Domestic Sector," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 335-351.
    4. Girma, Sourafel & Görg, Holger, 2002. "Foreign Ownership, Returns to Scale and Productivity: Evidence from UK Manufacturing Establishments," CEPR Discussion Papers 3503, C.E.P.R. Discussion Papers.
    5. Lindström, Tomas, 1999. "External Economies at the Firm Level: Evidence from Swedish Manufacturing," Working Paper Series 89, Sveriges Riksbank (Central Bank of Sweden).
    6. Andreas Pfingsten & Reiner Wolff, 2009. "Factor Supply Changes in Small Open Economies: Rybczynski Derivatives under Increasing Marginal Costs," Finnish Economic Papers, Finnish Economic Association, vol. 22(1), pages 9-20, Spring.
    7. Nicholas Oulton, 2018. "The UK (and Western) Productivity Puzzle: Does Arthur Lewis Hold the Key?," Discussion Papers 1809, Centre for Macroeconomics (CFM).
    8. Bournakis, Ioannis & Christopoulos, Dimitris & Mallick, Sushanta, 2015. "Knowledge Spillovers and Output per Worker: An Industry-level Analysis for OECD Countries," MPRA Paper 84948, University Library of Munich, Germany, revised 05 Oct 2016.
    9. Nigel Driffield & James H. Love & Karl Taylor, 2009. "Productivity And Labour Demand Effects Of Inward And Outward Foreign Direct Investment On Uk Industry," Manchester School, University of Manchester, vol. 77(2), pages 171-203, March.
    10. Pemberton, James, 1999. "Social Security: National Policies with International Implications," Economic Journal, Royal Economic Society, vol. 109(457), pages 492-508, July.
    11. Diewert, W. Erwin & Fox, Kevin J., 2017. "Decomposing productivity indexes into explanatory factors," European Journal of Operational Research, Elsevier, vol. 256(1), pages 275-291.
    12. Salvador Barrios & Eric Strobl, 2002. "Foreign direct investment and productivity spillovers: Evidence from the Spanish experience," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(3), pages 459-481, September.
    13. Biewen, Martin & Weiser, Constantin, 2011. "A New Approach to Testing Marginal Productivity Theory," IZA Discussion Papers 6113, Institute for the Study of Labor (IZA).
    14. Francesco Venturini & Ana Rincon-Aznar & Dr Michela Vecchi, 2013. "ICT as a general purpose technology: spillovers, absorptive capacity and productivity performance," National Institute of Economic and Social Research (NIESR) Discussion Papers 416, National Institute of Economic and Social Research.
    15. Gavin Cameron & James Proudman & Stephen Redding, 1997. "Deconstructing Growth in UK Manufacturing," Bank of England working papers 73, Bank of England.
    16. P. Hart, 2000. "Theories of Firms' Growth and the Generation of Jobs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(3), pages 229-248, November.
    17. Ana Rincon & Michela VECCHI & Francesco VENTURINI, 2012. "ICT spillovers, absorptive capacity and productivity performance," Quaderni del Dipartimento di Economia, Finanza e Statistica 103/2012, Università di Perugia, Dipartimento Economia.
    18. Oulton, Nicholas, 2018. "The UK (and Western) productivity puzzle: does Arthur Lewis hold the key?," LSE Research Online Documents on Economics 87394, London School of Economics and Political Science, LSE Library.
    19. Yao, Shujie & Wang, Pan & Zhang, Jing & Ou, Jinghua, 2016. "Dynamic relationship between China's inward and outward foreign direct investments," China Economic Review, Elsevier, vol. 40(C), pages 54-70.

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