EU Membership or Thatcher's Structural Reforms: What Drove the Great British Reversal?

CEPR Discussion Paper Series DP11856

Posted: 7 Aug 2019

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Nauro F. Campos

University College London; University of Michigan at Ann Arbor - The William Davidson Institute; IZA Institute of Labor Economics

Date Written: February 1, 2017

Abstract

This paper presents a dissonant view on post-war British economic performance. A defining feature is the decline of the UK relative to the six founding members of the European Union after 1945. However, this relative decline stopped. The conventional view is that a turning point occurs in the mid-1980s when Mrs Thatcher implements far-reaching structural reforms. This paper asks whether econometric evidence supports this conventional view and finds it does not. We then examine an alternative hypothesis: this turning point occurs around 1970 when the UK joined the European Community. We find strong econometric support for this view. The intuition we offer is that EU membership signalled the prominence of business groups that chose to compete at the high-tech end of the common European market against those business groups that preferred comparative advantage driven Commonwealth markets (mostly former colonies). Those pro-Europe business groups later become the constituency that provides support for Mrs Thatcher's reforms. Without this vital support, we argue, Mrs Thatcher's structural reforms would not have been nearly as effective, if proposed and implemented at all.

Keywords: European integration, UK relative economic performance

JEL Classification: N14, O47

Suggested Citation

Coricelli, Fabrizio and Campos, Nauro F., EU Membership or Thatcher's Structural Reforms: What Drove the Great British Reversal? (February 1, 2017). CEPR Discussion Paper Series DP11856, Available at SSRN: https://ssrn.com/abstract=2949749

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

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Siena, 53100
Italy

Paris School of Economics (PSE)

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Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

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United Kingdom

Nauro F. Campos

University College London ( email )

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London, WC1E 6BT
United Kingdom

University of Michigan at Ann Arbor - The William Davidson Institute

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Ann Arbor, MI 48109-1234
United States

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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