Online Appendices: The UK and Western Productivity Puzzle: Does Arthur

The case for not solve the problem since it would export demand shocks as an impor- not increase export demand.4 tant cause of recessions and subse- The fundamental difficulty with the quent slow growth, or even slumps, Pessoa-Van Reenen story is the in- is strengthened by considering the ex- ability of the Solow model to explain ample of smaller countries or sub- the UK’s productivity puzzle. [...] Benefits and Costs of Immigration Using the notation of equations (1)- to Natives (6) of the main text, the long run There is a large literature which steady state level of output per hour mostly claims that the impact of im- at time t is given by migration on the wages of natives [ ]α/(1−α) is negligibly small. [...] But their The value for nslow is the growth rate study used data from the boom pe- of native-born employment in the UK riod, so again is not evidence against while that for nfast is the growth rate the hypothesis of this article. [...] But the more rel- scale immigration is often made on evant finding in the present context the grounds that migrants bring valu- is that the skill levels of migrants are able skills lacking in the native popu- lower than those of the native born.10 lation. [...] to reduce migration from the rest of the world, which after all has been New Incentives for Investment the stated policy of the government A policy which the UK could adopt since 2010, but in practice this has on its own is to give radical new in- proved not to be the case; since 2010 centives for investment, for example and up to mid-2017 EU-born workers allowing full expensing of all types of ro.