An Empirical Investigation of Long-Run Growth in the UK

Posted: 1 Nov 2005

See all articles by Claudio Morana

Claudio Morana

Università di Milano Bicocca; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES); Center for Economic Research on Pensions and Welfare Policies (CeRP); Rimini Center for Economic Analysis - Europe ETS; Rimini Center for Economic Analysis - HQ

Abstract

In this paper the long-run growth of the UK economy is analysed over the period 1855-1997, using a Markov-Switching cointegration approach. We find that long-run economic growth can be explained by two permanent shocks, namely a technological shock and a labour supply shock. While technological progress seems to have a positive impact on the wage share and on income equality, the labour supply shock has the opposite effect, contributing to income inequality. Both shocks have a positive impact on aggregate output, but the bulk of long-run output growth variability is explained by the labour supply shock, suggesting that inequality is not harmful to growth.

Keywords: Markov switching, common trends, economic growth

JEL Classification: C32, O11

Suggested Citation

Morana, Claudio, An Empirical Investigation of Long-Run Growth in the UK. Structural Change and Economic Dynamics, Vol. 13, No. 1, pp. 49-70, 2002, Available at SSRN: https://ssrn.com/abstract=828864

Claudio Morana (Contact Author)

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