PPIW Report Publication: Improving the Economic Performance of Wales: Existing Evidence and Evidence Needs

In April 2016 the PPIW brought together leading experts and policy makers to consider what works in improving the performance of an economy such as Wales. We also held one-to-one discussions with experts to identify and explore the main issues in more detail. The resulting report describes what is known about the economic performance of Wales; which factors can contribute to economic growth in lagging regions; and summarises some initial conclusions on policy implications and future evidence needs.

Wales lags behind the UK average on most measures of economic performance. While the skills base, demography and geography of the country may go some way in explaining this, international evidence suggests that there are policies which can stimulate economic growth in lagging regions. Specifically, the evidence suggests that lagging regions should focus on:

  • reducing the proportion of individuals with very low skills or qualifications, rather than focusing on the higher end of the skills spectrum; and
  • investing in infrastructure projects that increase economic mass, and improve internal and external connectivity.

At the firm level, there is also good evidence that knowledge diffusion plays an important role in encouraging the adoption of innovations to improve productivity. Greater internationalisation through exporting and collaborating with international partners can also reinforce innovation activity and drive productivity. The evidence is less conclusive on the contribution of factors such as support for entrepreneurship, attracting inward investment and the role that government policy should take in these areas.

Experts identified individual policy interventions that – taken in isolation – can have unintended negative consequences. Policy makers should therefore focus on co-ordinating the right mix of policies.

Our report concludes that while there are no silver bullets for stimulating the economic performance of lagging economies, a focus on human capital (particularly addressing low skills), connective infrastructure (internal and external), and diffusing knowledge and innovation among firms should form a central part of the policy mix, and benefit the economy of Wales over the longer term.

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