Openness and Its Association with Productivity Growth in UK Manufacturing Industry

Bank of England Working Paper No. 104

39 Pages Posted: 12 Jan 2000  

Gavin Cameron

University of Oxford - Department of Economics (Deceased)

James Proudman

Bank of England, Monetary Instruments and Markets Division

Stephen J. Redding

Princeton University

Date Written: 1999

Abstract

A large theoretical literature exists that suggests that differences in growth performance may be related to variations in the extent of international openness. This paper is concerned with quantifying measures of openness and examining their association with productivity growth across 19 sectors in UK manufacturing between 1970 and 1992. Using the statistical technique of discriminant analysis, sectors were sorted into groups on the basis of their measured values of openness in 1970. Sectors classified as relatively open enjoyed significantly higher rates of total factor productivity (TFP) growth between 1970 and 1992 than those classified as closed. There was a positive correlation between the growth in labour productivity and lagged values of each of the observed measures of openness. This relationship was explained by a strong relationship between lagged values of openness and TFP growth. But, there was no evidence of a positive relationship between openness and that part of labour productivity growth explained by capital accumulation.

JEL Classification: F14, O47

Suggested Citation

Cameron , Gavin and Proudman, James and Redding, Stephen J., Openness and Its Association with Productivity Growth in UK Manufacturing Industry (1999). Bank of England Working Paper No. 104. Available at SSRN: https://ssrn.com/abstract=202230 or http://dx.doi.org/10.2139/ssrn.202230

Gavin Cameron

University of Oxford - Department of Economics (Deceased)

N/A

James Proudman (Contact Author)

Bank of England, Monetary Instruments and Markets Division ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Stephen J. Redding

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

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