Working to make government more effective


Political economy of growth

This paper provides an analytical framework to shed light on the institutional roots of persistent policy problems.

The UK suffers from a series of persistent policy problems to which existing institutions and processes seem unable to produce adequate long-term solutions. These problems include:

  • insufficient skills in the economy, caused by a long tail of poor educational achievement in schools and inadequate vocational education for 14-19 year olds
  • inadequate investment in infrastructure, highlighted by, for example, the limited aviation capacity in the South East
  • a lack of capacity to meet future energy demand
  • a lack of affordable housing in significant parts of England.

All of these problems put at risk future UK productivity and growth.

An earlier report of the London School of Economics Growth Commission, undertaken in partnership with the Institute for Government, explored some of these problems and proposed solutions. But like other studies in academia, this research largely ignored the policymaking process, and the institutions and incentives shaping it.

We set out to address that gap in this paper. By drawing on insights from political economy and political science we provide an analytical framework to shed light on the institutional roots of these problems. We consider options for reform and how they might come about. And we apply our framework to two of the important policy areas we have highlighted above: infrastructure investment and housing policy.

The paper also summarises the findings of three earlier reports on:

  • institutional weaknesses that increase the risk of sub-optimal policy outcomes
  • how the Westminster model of democracy exacerbates the impact of some of these institutional weaknesses, including examples of how this applies to infrastructure investment and housing
  • the view of academic literature on the factors that can encourage institutional reform.

We conclude by reflecting on the type of institutional innovation that is required to tackle problems in the governance of infrastructure and housing, and what might drive such innovation.

Institute for Government

Related content

23 OCT 2014 Report

Housing That Works for All

This paper examines the housing affordability crisis, presenting evidence on the risk of distortions in favour of homeowners is economically striking.