Productivity and Competitiveness in Wales
Output and productivity growth are indicators of standards of living and prosperity, which are important indicators of international competitiveness (Blackaby and Hunt, 1992). A key objective of the Welsh Government was to increase Welsh GDP per head to 90 per cent of the UK average by 2010 – a ten percentage point improvement on its position in 2002 (Welsh Assembly, 2002). Recent evidence suggests that if anything, the gap is widening, although certain areas are closer to achieving this than others.
At its simplest, productivity may be defined as the volume of output produced for a given level of inputs. The most common measure of productivity is labour productivity, often expressed in terms of output per head, or per hour. Productivity provides us with information on the efficiency of firms when we consider measures of total factor productivity, which takes accounts of all known inputs (typically, capital, labour, energy and materials – KLEMS).
Comparison of productivity across regions and countries is a useful exercise if we want to understand the extent to which Wales is performing well and as a means of identifying where things are particularly strong or where additional support and attention is required if Wales is to effectively compete with other nations – not only England, but within a European context (Peneder et al, 2009). However, it is also of considerable interest to identify areas that are performing better within Wales.
Thus, this research strand aims to consider Wales in a number of ways: firstly, Within Wales, looking at regions at broadly the NUTS3 level of disaggregation. Thus, we will be breaking down Wales into 12 regions. Secondly we aim to consider Welsh fortunes in the UK context. This is an area in which much of the existing research has focussed. Finally, we will look at Wales within the broader European Community, focussing on how it compares to other regions and countries of similar sizes.
Factors that affect productivity are thought to relate to firm competences (Teece, 1997) and the environment in which firms operate. HM Treasury have highlighted 5 areas for consideration and these will focus our efforts in identifying what determines productivity in Wales. These drivers of productivity are investment, innovation, enterprise, competition and skills.
The aims of this research strand are four-fold:
1. To provide baseline evidence on the level of, and the growth in, productivity in Wales
2. To identify areas within Wales that are performing well (and those that are performing less well)
3. To identify factors that affect productivity in Wales
4. To quantify the impact of these factors and outline ways in which changes might be instigated to enhance productive performance of firms in Wales
The research will be conducted largely using micro-data analysis, although comparisons at a sector level may also prove fruitful within a European context. Data on firm performance are available from two main sources; firstly we have access to the Company Accounts Database, Financial Analysis Made Easy (FAME) which provides up to date information on all incorporated companies in the UK. Secondly, we have been undertaking analysis using the Business Databases available at the Virtual Micro-Data Laboratory (VML), Office of National Statistics (ONS), Newport, some of which have been transferred to the Secure Data Service that has recently been established by the UK Data Archive.
A number of researchers will be involved in this research. These are David Blackaby, Rhys Davies, Mamata Parhi, Catherine Robinson
Related WISERD Publications
Forth J, Harris R, Rincon Aznar A and Robinson C, 2010, ‘The impact of the National Minimum Wage on productivity and competitiveness in the UK’ Swansea University Economics Discussion Paper Series SBE-E-01 (Available here)
Parhi M, Robinson C, 2011, ‘Knowledge-based Entrepreneurship and Innovation for a Prosperous Wales’ WISERD/PBS 001 (Available here)
For further information, contact Catherine Robinson: c.robinson@swansea.ac.uk
