Macroeconomic evaluation of the growth of the UK economy over the period 2000 to 2019

TL;DR

This study uses an information entropy statistical approach to analyze the UK economy's growth from 2000 to 2019, highlighting the influence of labour productivity on GDP per capita and real wages across different economic phases.

Contribution

It introduces a novel application of information entropy methodology to evaluate macroeconomic growth and productivity impacts over a multi-phase period.

Findings

Labour productivity growth closely linked to GDP per capita growth.

Weaker productivity and wage growth in 2014-2019 compared to 2000-2007.

Sustained investment in productivity could enhance future economic growth.

Abstract

An information entropy statistical methodology was used to evaluate the growth of the UK economy over the period 2000 to 2019, with an emphasis on the impact of labour productivity on gross domestic product (GDP) per capita and the average growth in real wages, during this time period. The growth of the UK economy over the period 2000 to 2019 can be described in terms of three distinct phases: 1) 2000 to 2007 - strong sustained economic growth 2) 2008 to 2013 - the impact of the international financial crisis, its immediate aftermath, and period of recovery 3) 2014 to 2019 - weak sustained economic growth The key determinant of the UK economic performance over this period would appear to the annual rate of growth in labour productivity. It was closely related to the annual rate of growth in GDP per capita, and it was significantly weaker in the period 2014 to 2019 compared to the period 2000 to 2007. This also corresponded with a weaker rate of growth in annual average real wages over the period 2014 to 2019 compared to the period 2000 to 2007. Throughout the period 2000 to 2019, UK CPI was maintained, on average, at approximately 2.1% per annum. More rapid UK economic growth would be expected to be achieved by sustained investment in measures that enhance labour productivity, with the further expectation that a sustained improvement in labour productivity would increase the annual rate of growth of UK GDP per capita and average real wages. While the results given in this paper are specific to the UK over the time period 2000 to 2019, the expectation is that the methodology and approach adopted can be applied to quantifying the dynamics of any developed economy over any time period.