The UK Is Similar to the US

Abstract

The UK resembles the US, with similar adverse changes in demography and productivity. Sharp falls in investment in both countries started well before 2008 and caused the subsequent slow growth in the net capital stock and labour productivity. The UK has experienced a similar rise in management pay and bonuses, so it is probable that the decline in investment and productivity in the UK is also the result of the perverse incentives of the bonus culture. Poor data means that the relationship between investment corporation tax and RoE cannot be tested for the UK. Like the US, however, large companies have been the main cause of the decline in investment and productivity. Brexit is likely to depress real living standards and amplify the problem of low to zero growth.