This document summarizes productivity trends in Ireland and Northern Ireland from the 1920s to present day. It finds that while Ireland saw strong GDP growth, productivity growth was concentrated in foreign-owned firms, hiding weaknesses in domestic firms. Northern Ireland consistently had lower productivity than Ireland and the EU15 average. The document analyzes sectoral and regional output, employment, and productivity. It questions Northern Ireland's focus on corporate tax rates to attract foreign investment, finding skills development and links between foreign and domestic firms are more important drivers of productivity growth. Post-Brexit, the role of the EU in Ireland's growth is a key consideration for Northern Ireland.

1. Productivity on the Island of
Ireland:
A tale of three economies
NERI Seminar Series Belfast,
April 11th 2019
Paul Mac Flynn and Paul Goldrick-Kelly
Nevin Economic Research Institute
Paul.MacFlynn@nerinstitute.net
paulgk@nerinstitute.net
www.NERInstitute.net

2. Historical Trends
62
71
63
73
80
75
78 79 78 78 76
51
46
52
59
65
79
89
97 95
100
105
0
20
40
60
80
100
120
1926 1947 1960 1973 1986 1991 1994 1995 1996 1997 1998
Source: Birnie & Hitchens (2001)
NI ROI

3. Gross Value Added per Hour ROI
and NI to EU15 ratio
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
ROI NI

4. Regional Trends

5. Regional Trends
Region/State % of EU15 Average
Dublin 208.6
South-West 156.8
Belfast 136.8
ROI 128.0
Mid-West 97.9
Mid-East 91.3
West 90.6
South-East 85.0
NI 75.0
East of Northern Ireland 70.0
Midland 63.8
West and South of Northern Ireland 63.4
Outer Belfast 61.1
Border 60.5
North of Northern Ireland 58.2

6. Regional Trends

7. Sectoral Output

8. Sectoral Employment

9. Sectoral Productivity

10. Recent Trends – FDI (2014)

11. GDP and GNI* per Hour Worked
to EU15 Ratio

12. Recent Trends – FDI (ROI)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2008 2009 2010 2011 2012 2013 2014 2015
ROI to EU15 Foreign Owned ROI to EU15 Domestic Ratio

13. Structure of Output
ROI Domestic EU 15 Domestic NI
Sector 2012 2014 2012 2014 2012 2014
Manufacturing 12.7 13.6 23.3 23 23.3 24.5
Wholesale and retail 21.5 19.4 18.0 17.9 28.4 26.1
Transportation and storage 11.8 11.1 8.7 8.5 7.5 7.7
Accommodation and food 7.3 5.9 4.1 4.0 3.7 4.0
Information and communication 5.5 6.2 7.5 7.3 5.3 5.6
Real estate activities 2.0 2.1 4.9 4.8 3.0 2.6
Professional, scientific and technical 13.0 12.8 11.1 11.5 6.3 7.0
Administrative and support service 6.8 13.9 7.1 7.8 5.8 6.5
Other 19.4 15.0 15.3 15.2 16.8 16

14. Structure of Employment
ROI Domestic
(%)
EU 15 Domestic (%) NI (%)
Sector 2012 2014 2012 2014 2012 2014
Manufacturing 9.5 11.8 19.1 18.6 17.6 18.3
Wholesale and retail 29.3 27.0 24.5 23.9 31.1 29.9
Transportation and storage 7.9 8.7 7.9 7.7 5.8 6.1
Accommodation and food 17.1 14.7 9.1 9.3 10.0 10.6
Information and communication 4.3 4.7 4.3 4.5 4.0 4.3
Real estate activities 2.6 2.0 2.3 2.5 2.0 2.1
Professional, scientific and technical 10.7 10.8 9.7 10.0 6.3 6.2
Administrative and support service 8.6 7.9 10.3 10.9 11.2 11.0
Other 10.0 12.3 12.7 12.6 12.0 11.3

15. Foreign Controlled Structure
ROI Foreign (%) EU 15 Foreign (%)
Sector Employment Output Employment Output
Manufacturing 25.6 47.0 32.4 33.2
Wholesale and retail 27.6 11.8 25.6 22.0
Transportation and storage 3.5 1.3 6.3 5.4
Accommodation and food 8.0 1.1 4.6 1.7
Information and communication 12.2 30.7 7.3 12.5
Real estate activities 1.3 0.5 1.0 1.0
Professional, scientific and technical 6.4 2.5 6.2 7.5
Administrative and support service 12.5 3.4 11.0 7.6
Other 2.9 1.8 5.0 9.1

16. ROI Foreign

17. ROI Domestic
0
0.5
1
1.5
2
2.5
3
3.5
Total business economy Manufacturing Wholesale and retail
trade; repair of motor
vehicles and motorcycles
Transportation and
storage
Accommodation and
food service activities
Information and
communication
Real estate activities Professional, scientific
and technical activities
Administrative and
support service activities
2012 2014

18. ROI Domestic
0
0.2
0.4
0.6
0.8
1
1.2
0
10,000
20,000
30,000
40,000
50,000
60,000
2012 2014
Ireland EU15 Ratio ROI to EU15

19. Three economies?
Sector Domestic ROI ROI Foreign NI
Total 53,527 179,603 45,357
Manufacturing 61,492 330,220 56,331
Wholesale and retail 38,474 76,555 40,193
Transportation and storage 67,887 67,289 56,855
Accommodation and food 21,576 23,856 16,748
Information and communication 69,726 452,418 50,654
Real estate activities 55,137 62,488 54,103
Professional, scientific and technical 63,576 69,880 51,252
Administrative and support service 94,595 48,866 23,213

20. Policy?
•NI Corp tax policy misplaced – range of policy levers available to NI
•FDI – Quality not quantity, other areas more important than corp tax
•FDI can’t be about ‘buying in’ success - absorptive capacity matters
• FDI most successful when domestic firms integrate
•Skills a key issues where NI lacks opportunity to take FDI potential
•FDI hides domestic weaknesses in ROI – distribution of productivity
very broad
•Tax breaks in hospitality, misguided from productivity standpoint.
•Role of EU in ROI growth, key issue for NI post-Brecit.