Institutions and Long-Run Growth in the UK: the Role of Standards
In this paper we consider the relationship between the standards created by national standards bodies and long run economic growth, exploring the relationship in the context of the UK and the British Standards Institution (BSI). We suggest that standards provide a key enabling mechanism for the widespread diffusion of major technologies, while being generally supportive of incremental innovation and general technological understanding. In order to further understanding of this mechanism we measure the ‘output’ of the BSI by estimating the size of the BSI ‘catalogue’ available to the economy since its inception in 1901. The measure allows us to estimate an augmented production function for the UK economy over the period 1948-2002. Within a co-integrating framework, we find a statistically significant and unique co-integrating vector between labour productivity, the capital-labour ratio, exogenous technological progress and the BSI catalogue. The long-run elasticity of labour productivity with respect to the standards stock is estimated to be about 0.05, so that the rapid growth of the catalogue in the postwar period is associated with about 13% of the aggregate growth in labour productivity.
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