This paper finds that total factor productivity in Scotland was 11% below the ‘rest of the UK’ in 2012. This is found to be mainly due to negative plant ‘composition’ effects in those (service) sectors where the productivity gap is largest. It is also found that new plant start-ups and foreign-owned plants both contributed negatively to TFP growth during 1997-2012. This casts doubt on whether relying on greater tax incentives post- 2016 to increase the rate of new firm formation and encourage foreign investment will result in a ‘step-change’ in productivity growth.
Harris, R., & Moffat, J. (2014). Lower Productivity in Scotland, 1997-2012: Implications Post-2016