Productivity Levels in Northern Ireland Manufacturing Industry: A Comparison with Great Britain

Measuring Efficiency in Northern Ireland Manufacturing Using a Frontier Production Function Approach

“…Previous UK work has used aggregated time series data to estimate regional production functions (Dixon and Thirlwall, 1975;Harris, 1982), or it has simply tended to look at relative productivity and make inferences about the underlying efficiency of a region (e.g. Hitchens and Birnie, 1989). In contrast, this study has estimated a crosssection production function using a frontier approach and data drawn from individual firms.…”

Policy Review Section

“…In fact disadvantages of industrial structure and higher energy costs, and the direct impact of political violence, explain only a minority of the 20 percentage point productivity shortfall ofNorthern Ireland (HITCHENS and BIRNIE, 1989b). Whilst Teague emphasizes the peripherality of Northern Ireland, it should be noted that differential transport costs are relatively small (HITCHENS and O'FARRELL, 1987, 1988a, 1988bWOOD and PEIDA, 1987).…”

“…Even if the policy could be implemented its long-term impact would be doubtful given that it would give highly skilled members of the Northern Irish labour force an incentive to migrate to Great Britain. The pool of highly skilled personnel in Northern Ireland is already proportionately smaller than in Great Britain (HITCHENS and BIRNIE, 1989b) and pay cuts would reinforce the perception amongst talented outsiders that Northern Ireland was an unpleasant place to work and live in (because of the political troubles). Perhaps even more serious would be the fact that low wages in Northern Ireland would reinforce the market signal to firms to specialize in low skill simple products of poor quality.…”

“…This relatively optimistic evaluation of the direct impact of the Troubles taken together with the conclusion that the Northern Ireland location is not significantly more costly than that of either Scotland or the Republic, implies that if Northern Ireland can ensure the quality of labour and management are sufficiently high, then there is no reason why Northern Ireland should not compete for the types of investment the Republic and Scotland have been successful with (notably, microelectronics and pharmaceuticals). If there are any deficiencies in Northern Ireland's skill base these could be tackled by transferring to training some of the grant resources previously allocated to subsidizing the capital purchases of incoming plants (HITCHENS and BIRNIE, 1989b). Given the traditional stress by the authorities on the supposed excellency of the Northern Ireland 'work ethic' and the quality of the local labour force ( H M GOVERNMENT, 1982) there might be some political opposition to this course of action.…”

“…Whilst it noted that in recent years state subsidies had provided about 75% oftotal spending on land, building and machinery in Northern Ireland, there was no consideration whether this extent of subsidization of capital has produced commensurate gains in corporate performance. Given that Northern Ireland's comparative productivity performance has remained poor relative to Great Britain BIRNIE, 1989a, 1989b) the question arises as to whether the traditional emphasis on capital subsidy should be replaced by one on management and labour training. In spite of these deficiencies, Puthjinder still made the insightful observation that there might be a connection between the relatively high rate of grant aid in Northern Ireland and the relatively low level of productivity.…”