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Medium and long run prospects for UK growth in the aftermath of the financial crisis

  • Nicholas Oulton

    ()

    (London School of Economics (LSE), Centre for Economic Performance (CEP)
    Centre for Macroeconomics (CFM))

In this paper I argue that the financial crisis is likely to have a long term impact on the level of labour productivity in the UK while leaving the long run growth rate unaffected. Based entirely on pre-crisis data, and using a two-sector growth model, I project the future growth rate of GDP per hour in the market sector to be 2.61% p.a. Based on a cross-country panel analysis of 61 countries over 1950-2010, the permanent reduction in the level of GDP per worker resulting from the crisis could be substantial, about 5½%. The cross-country evidence also suggests that there are permanent effects on employment, implying a possibly even larger hit to the level of GDP per capita of about 9%.

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File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2013/CFMDP2013-07-Paper.pdf
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Paper provided by Centre for Macroeconomics (CFM) in its series Discussion Papers with number 1307.

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Length: 107 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:cfm:wpaper:1307
Contact details of provider: Web page: http://www.centreformacroeconomics.ac.uk/

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