What Have Two Decades of British Economic Reform Delivered?

73 Pages Posted: 21 Feb 2002 Last revised: 21 Jul 2022

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Date Written: February 2002

Abstract

Beginning in 1979 with the newly electted Thatcher Government and continuing under successive Conservative and Labour Governments, the United Kingdom has embarked on a two-decade-long experiment in economic reform. We present evidence that the reform process has succeeded in making the UK more market-friendly than its European competitors. In fact, by the 1990s Britain ranked near the top of the league tables for freedom of markets, in some cases even ahead of the United States. To evaluate the effects of these reforms we compare trends in macroeconomic outcomes in the UK relative to the US, Germany, and France. During the 1980s and 1990s Britain halted the relative declines in GDP per capita and labour productivity that had characterized earlier decades, and partially closed the gap in income per capita with France and Germany. These gains were mainly attributable to relative rises in employment and hours. Unlike its EU competitors, Britain was able to achieve high employment-population rates with rising real wages for workers. The case that the change in economic performance can be credited to market-oriented reforms is harder to prove. Nevertheless, based on our own macro-level analyses, and micro-level evidence from several companion studies, we conclude that economic reforms contributed to halting the nearly century-long trend in relative economic decline of the UK relative to its historic competitors, Germany and France.

Suggested Citation

Card, David E. and Freeman, Richard B., What Have Two Decades of British Economic Reform Delivered? (February 2002). NBER Working Paper No. w8801, Available at SSRN: https://ssrn.com/abstract=301422

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

Room 3880
Berkeley, CA 94720-3880
United States
510-642-5222 (Phone)
510-643-7042 (Fax)

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Richard B. Freeman

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3900 (Phone)
617-868-2742 (Fax)

University of Edinburgh - School of Social and Political Studies ( email )

Adam Ferguson Building
George Square
Edinburgh EH8 9LL
United Kingdom

Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States
617-868-3900 (Phone)

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE