Supply-Side Policies 3 Flashcards
Spending on R&D UK
Remained low as a % of GDP
Biggest barriers to innovation
Risk aversion
Uncertainty
Lack of high-skilled workers
Lack of information
How has the British government tried to boost R&D spending
Through tax credits but critics say that this policy has been ineffective
What is the new British was of incentivising businesses into R&D
Patent boxes- where profits from research projects are taxed at a lower rate
Evaluation point on spending on R&D
The level of research spending is not necessarily a guide to the pace and success of innovation in a country
What is the main goal of the Northern Powerhouse Project
To have a balanced region recovery to help supply-side potential growth
The north suffers from long term unemployed and a high concentration of public sector/manufacturing - suffered during the recession
Policy options for the Northern Powerhouse Project
- infrastructure investment
- supporting science and innovation
- backing clusters of businesses such as marine engineering
What is cost competitiveness
Differences in unit costs between producers - reflected in prices
What are unit labour (wage) costs
The labour costs of supplying goods and services per unit of output
What are unit labour costs determined by
Cost of employing people
Productivity of these people
How is data unit labour costs expressed
In relative terms - we compare unit labour costs in one country relative to another
When will unit labour costs rise
When wages rise faster than the annual improvement in productivity
What are the main non-wage costs for businesses
- cost of meeting environmental laws
- employment protection
- business pensions
What is the ‘world economic forum - global competitiveness report’
A report published annually and is an attempt to rank countries using a group of indicators
Examples of indicators that are used in the ‘World Economic Forum’
- infrastructure
- institutions
- health and education
- market size
What countries in 2014 had the highest general quality of infrastructure
Switzerland (1)
Hong Kong (2)
UAE (3)
Strengths of the UK ranking in global competitiveness
Efficiency of its labour market
Sophisticated and innovative businesses
Larger consumer market
Weaknesses of the UK ranking in global competitiveness
Macro environment
Large fiscal deficit
Comparatively low national savings
Policies to improve international competitiveness of the U.K. economy
- improving functioning of labour markets
- infrastructure investment
- supporting enterprise / entrepreneurship
- macro stability
How can we improve functioning of labour markets
Encouraging inward migration
Improvements in management quality
How can we support enterprise
Improved access to finance
Incentives for business innovation and invention
Reductions in business red tape
How can we encourage more macro stability in the UK
Low inflation
Competitive banking
Competitive XR
