Scotland’s “Middling” Productivity – An International Perspective

Mark Mitchell and Robert Zymek

University of Edinburgh


It is now well understood that differences in labour productivity – the value of goods and services that can be produced in an average hour of work – explain many observable economic differences between countries. Evidence shows that that highly productive economies outperform their less productive counterparts in in terms of per-capita income, population health, subjective wellbeing, and state-capacity (Caselli, 2005; Jones, 2015; Sacks, et al., 2012). For this reason, it is a cause for concern that labour productivity in Scotland – just as in the UK as a whole – is fairly low compared with other advanced economies. It suggests that Scotland could do better, and improve the lives of its citizens by moving up the productivity tables.

In work published earlier this year by the David Hume Institute (Kelly, et al., 2018), we examined Scotland’s productivity performance in an international context. We found that relative to member countries of the OECD – a club of advanced economies – Scotland’s labour productivity is only middling: Scotland is more productivity than most poorer OECD countries; but it is less productivity than many of its EU neighbours, including countries such as Finland, Denmark, Belgium and Ireland.

Continue reading

December 3, 2018

Scotland and the latest Brexit modelling scenarios – a negative outcome all round

Over the course of this week, the UK Government, the Scottish Government and the Bank of England all published new Brexit analysis.

We have been asked by a number of people to give our take on these numbers.

So in this blog, we attempt to summarise what each model is telling us and the implications for Scotland.

In short, the numbers don’t look great. Far from it.

Even under the UK Government’s favoured deal, the UK economy is expected to be smaller in the long run by around 4%.

But it is the Bank of England’s scenario of a disorderly ‘no deal’ Brexit that is the most eye-watering. Here the UK economy could shrink by 8% in a year – double the size of Scotland’s recession during the financial crisis. Unemployment could rise to 7.5%. If that was replicated in Scotland this would be equivalent to around an additional 100,000 people out of work.Continue reading

November 30, 2018

What might happen to Scotland’s economy in the event of ‘no deal’?

The prospects for ‘no deal’ to be agreed between the UK and the EU have increased in recent weeks.

A lot has been written about the potential long-term economic implications from Brexit. All else remaining equal, the larger the economic barriers between Scotland and its main international trading partner, the greater the potential hit to the country’s growth potential.

But very little has been written about what the implications might be in the short-run from ‘no deal’….beyond “bad” or “very bad”.

In this blog we try to unpick some of the key issues surrounding what a ‘no-deal’ might mean for the economy and just why it is so difficult to forecast.

Continue reading

November 23, 2018

Key points from our 2018 budget report

Today we publish our annual Budget report, “Scotland’s Budget 2018” which is available at the following link.

The aim of the report is to set out the opportunities, risks and choices facing the Scottish Government as it prepares it draft budget for 2019/20. The report covers the outlook for the Scottish economy and the Scottish budget.

Each year we also focus on a variety of longer term public finance questions. This year we focus on the options for reforming taxes and introducing new taxes, and discuss the differences in the funding of higher education between Scotland and England.Continue reading

November 8, 2018

The price of loyalty! (Differential Pricing – aka dual pricing – in Insurance and Other Markets)

Alex Dickson, Department of Economics, University of Strathclyde. Alex is a Senior Lecturer with research interests in Game Theory, Behavioural Economics and Industrial Economics

On Wednesday this week the Financial Conduct Authority (FCA) announced that it was launching a market study into the general insurance industry covering motor and home insurance, with a focus on insurance pricing practices. This follows its work focusing on pricing practices in the household insurance market. In addition, the Competition and Markets Authority (CMA) are in the early stages of an investigation into Loyalty Penalties following a super-complaint from Citizens Advice. What is going on here? Identifiable groups of consumers are being charged different prices for the same product or service for reasons that are not related to the cost to serve those consumers, leaving groups of consumers being exploited. A typical example is new vs existing customers, where existing customers pay substantially higher prices as their contracts are rolled over from year to year. The price of loyalty!Continue reading

November 2, 2018