The Northern Ireland Economy: Problems and Prospects

Abstract

This paper considers the lacklustre performance of the Northern Ireland economy in recent decades, in particular the very low productivity growth. The low level of human capital and the continued low levels of investment, account for much of this poor performance. To address its economic weakness Northern Ireland needs to reallocate resources to investment in physical and human capital over a sustained period. To date, large transfers from central government have ensured that the standard of living in Northern Ireland is close to the UK average and above that of Ireland, in spite of its weak economy. However, the dependence of Northern Ireland on these transfers leaves it very vulnerable to shocks. Because of Northern Ireland’s dependence on transfers and its weak economic structure, Irish unification, however it was handled, would be likely to be very expensive for both the Republic of Ireland and Northern Ireland.