Investment lies at the root of economic growth and prosperity. When an economy channels funds into capital, it creates the building blocks for a higher level of productivity in the future, and more diffusion of ideas and innovation that underpin technological progress and higher wages.
The British economy has suffered from chronic levels of underinvestment compared to those economies that have delivered greater improvements in living standards over the past quarter of a century. Low investment is the proximate cause of low productivity and the UK’s weak growth performance. But low investment itself is due to many factors, implying that no single reform is sufficient to resolve the problem while many may be necessary.
The paper also includes a number of policy implications.
Authors: Jagjit S. Chadha (NIESR), Tony Venables (The University of Manchester)
