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The role of relative prices in the UK’s aggregate labour productivity

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  • Coyle, Diane
  • Mei, Jen-Chung
  • Hampton, Lucy

Abstract

This paper investigates the effects of relative price shifts on aggregate labour productivity (ALP) growth in the UK. Using two extended sectoral decomposition frameworks, we isolate the contribution of relative output price changes to ALP growth and compare recent double-deflated UK data with counterfactual single-deflated data to examine the interplay between relative price contributions and productivity performance. Our analysis reveals significant relative price effects on ALP growth in manufacturing and ICT under an extended T ModifyingAbove o With two dots o¨ $\ddot{o}$ rnqvist decomposition but only in ICT when applying an extended Generalized Exactly Additive Decomposition (GEAD) framework. To assess whether shifts in market power explain these significant changes in relative prices, we estimate aggregate markups for manufacturing and ICT. The findings highlight substantial variations in markups from 2008 to 2019, reflected in notable fluctuations in price effects over time. These results raise important questions about the relative roles of value creation and the labour contribution in assessing the UK’s productivity performance.

Suggested Citation

  • Coyle, Diane & Mei, Jen-Chung & Hampton, Lucy, 2026. "The role of relative prices in the UK’s aggregate labour productivity," Macroeconomic Dynamics, Cambridge University Press, vol. 30, pages 1-70, January.
    • Handle: RePEc:cup:macdyn:v:30:y:2026:i::p:e70_70
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