Ciaran Driver

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• BE, MA, MSc(Econ) PhD FAcSS
• Professor at SOAS University of London

This paper evaluates South African manufacturing performance over 25 years. It reports the evolution of five basic variables: employment, mark-ups, exports, domestic sales, and investment, using an aggregated sample of firms from a reliable business database. The approach differs from other economic models by the complementary use of management pe...

Empirical work on stock market data, coupled with behavioural findings on corporate decision-making, have produced a set of challenges for orthodox macroeconomics. This paper critically considers the work of Andrew Smithers and related contributions, the insights from which have largely been ignored in consensus economics. Key features of this alte...

The theoretical framework that informs dividend studies is somewhat loose. This makes it difficult to test competing views on dividend behaviour. One view is that it reflects a useful discipline on managerial autonomy to invest; another view is that it represents a constraint on investment due to misinformed or short-term investors. As a first step...

Why Starmer Can't be Blair | Fabian Society https://fabians.org.uk/publication/winter-2022/ This edition of the Fabian Review explores the long-term change a Starmer government could deliver, with contributions from Karl Pike, Francis Beckett and Ciaran Driver.

The literature suggests that the dispersion of agents’ forecasts of an event flows from heterogeneity of beliefs and models. Using a data set of fixed event point forecasts of UK GDP growth by a panel of independent forecasters published by HM Treasury, we investigate three questions concerning this dispersion: (a) Are agent’s beliefs randomly dist...

This chapter reviews both the empirics of investment in South Africa since the Transition and the associated attempts to explain its evolution. Many of the traditional theories are found to lack robust support. THe chapter reviews issues such as cost of capital, uncertianty, competition and crowding out and situates investment within the context of...

While South Africa shares some characteristics with other middle-income countries, it has a unique economic history with distinctive characteristics. South Africa is an economic powerhouse with a significant role not only at the southern African regional and continental levels, but also as a member of BRICS. However, the country faces profound deve...

Chapter 13 in: The Political Economy of Industrial Strategy in the UK From Productivity Problems to Development Dilemmas Edited by Craig Berry, Julie Froud, Tom Barker Hardback ISBN 9781788213394 Paperback ISBN 9781788213400 e-book ISBN 9781788213417 368 pages | 234 x 156mm | 25 March 2021 Series: Building Progressive Alternatives Agenda Publishing...

Inclusive ownership funds have been promoted by many on the left as a way of giving employees more say in the way businesses are run. But is there a better means to a fairer end? Ciaran Driver takes a look.

This chapter from the book The Unbalanced Economy (Palgrave Macmillan 2014) provides some background to the debate on “Nonsense Output Gaps” as discussed in contributions such as: https://www.socialeurope.eu/output-gap-nonsense. It discusses the British version of the NAIRU in historical context, explaining the origin of the nonsensical proposition...

We explore the role of taxes on stimulating investment decisions for levered firms under cash flows and investment costs uncertainty using the adjusted present value-based real options approach developed by Myers and Read (2019). We extend their work to consider combined tax credits and uncertain investment costs. We then run a numerical analysis t...

The economics of dividend policy has focused on the single tight narrative that dividends keep managers honest, mitigating concerns that they over-invest. This article provides a critique of that agency narrative, arguing that pressure from short-term focused investors, executives and board members pushes the firm into preemptive actions of returni...

Full Paper URL: https://www.wider.unu.edu/node/192381 Abstract: This paper provides a retrospective assessment of the effects of trade policies on South African manufacturing since the transition to democracy, examining the differences and commonalities in the views of economists in favour of and against an acceleration of trade liberalization. Da...

Presentation slides to accompany the article "Financial Constraints...." presented at a seminar for the Global Finance Centre, SOAS 2018

We estimate the effect of external financial constraints on fixed investment intentions for UK manufacturing by size of firm distinguishing between normal effects and those since the financial crisis began in the UK in 2007. Our financial constraints data are constructed to reflect only supply-side influences i.e. they are independent of cyclical c...

We investigate the accuracy of capital investment predictors from a national business survey of South African manufacturing. Based on data available to correspondents at the time of survey completion, we propose variables that might inform the confidence that can be attached to their predictions. Having calibrated the survey predictors' directional...

We estimate the effect of external financial constraints on fixed investment intentions for UK manufacturing by size of firm distinguishing between normal effects and those since the financial crisis began in the UK in 2007. Our financial constraints data are constructed to reflect only supply-side influences i.e. they are independent of cyclical c...

MEDIA REVIEWS The chapters in this book are timely, ambitious, relevant, refreshing and offer insights on the limitations of the dominant model of corporate governance, while proposing imaginative approaches for reform. - Amon Chizema, Political Quarterly "Corporate Governance in Contention is highly recommended reading for anyone, whether a novic...

This book presents a series of original chapters dealing with one of the most important aspects of contemporary capitalism. Corporate governance is central to the successful performance of economies and it is hugely contentious. The chapters critically assess the state of play in respect to the economic, institutional and political character of cor...

In January 2018 the facilities management and construction company Carillion was forced into administration after it was found to be insolvent with 43,000 jobs put at risk and the future of 28,000 pensions uncertain. In May of the same year Virgin East Coast Main Line Rail company reengaged on its licensing agreement to operate the London to Edinbu...

CORPORATE GOVERNANCE IN CONTENTION, OXFORD UNIVERSITY PRESS JUNE 2018 Ciaran Driver and Grahame Thompson bring together the thinking of 20 leading European scholars to offer a sustained critique of the shareholder wealth maximization norm, which became the dominant model of corporate law and governance in the U.S. in the 1980s and 1990s, and has in...

The purpose of this article is to examine whether Research and Development (R & D) expenditure is biased downward because of self-serving behavior of highly incentivized managers. This offers an insight into the general relationship between incentives and opportunism. Using instrumental variables and panel-data methods for a sample of high R & D sp...

Advertising and its effects have been debated for well over a century. In the last few decades a generally sceptical view of the benefits of advertising has been overturned by a series of academic advances in economics that detail a variety of ways in which advertising may affect the economy and society. This academic work has however been parallel...

Advertising and its effects have been debated for well over a century. In the last few decades a generally sceptical view of the benefits of advertising has been overturned by a series of academic advances in economics that detail a variety of ways in which advertising may affect the economy and society. This academic work has however been parallel...

At the time in which this book was first published in 1987, mass unemployment had emerged as the dominant, most visible, problem of the West European economies. In this challenging discussion of ways to overcome unemployment Ciaran Driver stresses the importance of managed restructuring. This book is ideal for students of business and economics.

“"The world financial crisis has led to a concern about rebalancing the UK economy away from financial services and to a revival of interest in industrial policy. This book critically assesses the economic record of the UK in the era of supply side liberalism. It sets out the role for an industrial policy for the UK embedded in a wider framework of...

China’s growth model suggests that the 2008 financial crisis may have affected the Chinese economy differently from what one observes in mature market economies. In this paper, we examine how Chinese corporate investment responded to the financial crisis by using 1689 listed nonfinancial firms during Q12006-Q32010. We document that (1) the overall...

Companies are managed day to day by their senior managers, who are answerable to the board of directors. But to whom do company directors answer? What guides the decisions they make? And in whose interests are companies run? The answers to these questions lie in our corporate governance system. The effectiveness of the UK corporate governance syste...

This paper investigates the role of cross-sectional dependence among private forecasters, assessing its impact on the measurement and use of the forecasting uncertainty. We determine the circumstances under which cross-sectional measures of uncertainty (such as the disagreement across forecasters) are valid proxies for private information, and anal...

This is one of the 37 peer-reviewed commissioned papers that informed the Foresight Future of Manufacturing project. This paper provides background information to help with policy choices in respect of manufacturing investment. It is organised in four substantive sections beginning with (2) an account of the statistical record on broad investment c...

This paper investigates the determinants of R&D expenditure using a sample of UK listed companies with the highest spend from 2000 to 2005. We investigate the effect of corporate governance and ownership on R&D, using panel data. The results provide some evidence that more governance tends to depress R&D activity, a finding that is robust to whethe...

During the 1980s Britain became one of the world's most market-oriented economies, an approach which resulted in three severe recessions and a deepening degree of inequality. This book argues that a rebalancing of the economy will remain elusive until proactive policies are implemented at the corporate and industrial level.

In Chapter 4 we highlighted the potential for market failure in allocating fixed capital, one reason being the difficulty of investment decision-making under uncertainty. That argument in itself may not be enough to convince doubters of the case for a negative bias to capital investment. It may for example reasonably be claimed that the ‘animal spi...

A key reason why the UK persisted with a pronounced pro-market stance — even after the Thatcher-Major years had delivered no increase in trend growth — was the intellectual climate that paralleled the emergence of a finance dominated global economy. We outline in section 6.2 how financial globalization shaped ideas on economic policy from the 1980s...

Macroeconomic and industrial policies are not the only — and maybe not even the most important — ingredients for economic success. Company boards set decisions that can unleash or constrain growth and when these individual decisions are closely correlated they may even be decisive for the macroeconomic growth rate. Company boards, in turn, are cond...

The UK is an exemplar of a free market economy; reforms pursued by all governments since the 1980s have resulted in ‘one of the most market-friendly economies in the world’ (Card et al 2004, p.13). The UK has tended to lead France and Germany and even the US on the degree of flexibility in hiring and firing and related matters (Card and Freeman 200...

The economic constraint that has preoccupied policymakers in recent decades has been that of wage and price inflation. The policy response — structural reform of labour markets and monetary policy rules — is credited with giving rise to the ‘great moderation’, a reduced volatility of output and price inflation. The success of this approach was acce...

A major goal of economic policy in the market era was to transform the labour market. Far more than any other advanced economy, and beginning with the high unemployment decade of the 1980s, British economic policy has centred on the creation of a flexible labour market, to the exclusion of much else, with the exception perhaps of the search for a c...

The fallout from the worst economic crisis within living memory has commanded unprecedented attention from economists and others attempting to understand and contain it through a mixture of global and domestic action. In this book we approach the crisis not as a single event but as part of a process whose roots reside in longer-term tendencies that...

The lack of concern for capital investment among UK policymakers is to some extent puzzling because, as noted in Chapter 2, it provided a mainstay of economic beliefs up to the 1980s, and remains important for growth theory. What exactly are many economists objecting to when they criticize the ‘exaggerated belief in the importance of promoting inve...

This paper compares pooled models of capital investment with non-pooled models using the CBI Industrial Trends Survey, particularly focusing on the effect of uncertainty on investment authorisation at the industry level. Two kinds of uncertainty measures are used. One is based on the cross sectional dispersion of expectations, while the other is co...

This paper reviews measures of uncertainty used in economic estimation. For a set of industries, we compare measures of uncertainty calculated by GARCH and by cross-section dispersion of expectations from survey data. We analyze the relationship between the two sets of measures. The analysis is carried out for two sets of variables viz. industry op...

This article uses unique survey-based data that record the extent of positive and negative disequilibrium in capital stock at industry level. Change in these disequilibria are hypothesized to take account of planned and revised targets, and the influence of uncertainty on adjustment. We find that increased uncertainty slows the adjustment of fixed...

This article considers the role of hurdle rates in the analysis of investment decisions, analysing a sample of business units from the PIMS (Profit Impact of Marketing Strategy) databank of North American companies, which provides rarely observed data on hurdle rates. Although the standard literature suggests that firms should only invest if the re...

Productivity variables are often said to have no effect on the NAIRU under wage bargaining as the labour share is unaffected when production is characterised by a unit elasticity of substitution. While production functions such as the CES can explain a negative relationship between investment and equilibrium unemployment, the implication then is th...

In this paper, we analyse a new dataset on innovation in the British regions from 1990 to 2006. We interpret these data as representing the rate of growth of investment in innovation which we analyse using a range of estimators. The paper explores the role of macro- and microeconomic determinants of innovation. In addition to standard determinants...

This paper argues that the production constraints in the basic NAIRU model should be distinguished by type: capital constraints and labour constraints. It notes the failure to incorporate this phenomenon in standard macro models. Using panel data for UK manufacturing over 80 quarters we show that capital constraints became relatively more important...

This paper presents an empirical study of the channels of influence from uncertainty to fixed investment suggested by real options theory. Using panel data from the Confederation of British Industry (CBI) Industrial Trends Survey, we report OLS estimates of the impact of uncertainty on investment where the regressors are augmented by cross-sectiona...

In this paper I investigate whether a regional innovation indicator or a national innovation indicator helps to explain the variation in unit cost of production for manufacturing industries in the standard UK regions. I model unit cost by an autoregressive process that allows for varying capacity utilisation. Using unique time-series regional data...

The reform of corporate governance is again on the agenda in the wake of Enron and excessive risk-taking by financial institutions. However, the search for new and better forms of governance often seems to lack guiding principles. A theory of corporate governance ought to emerge from a theory of the firm. Yet, the literature shows how this project...

In this paper, we provide a coherent theoretical investigation of the relationship between cross-section and time series measures of uncer- tainty, which are often employed as perfect substitutes in empirical applica- tions. The main .nding of our analysis is that there exists an ambiguous sign in the discrepancy between the two measures of uncerta...

We use UK survey data on variation in business optimism by manufacturing size group to estimate the determinants of optimism using OLS and SURE. There are similarities across the size groups but also some differences: the medium-size group seems to have been unusually affected by real interest rates in recent years. We also model investment authori...

This paper argues that the production constraints in the basic NAIRU model should be distinguished by type: capital constraints and labour constraints. It notes the failure to incorporate this phenomenon in standard macro models. Using panel data for UK manufacturing over 80 quarters we show that capital constraints became relatively more important...

We estimate a translog cost function for UK manufacturing storing the time dummy coefficients to estimate external effects. Such effects are found to stem not only from aggregate activity but also from activity in mechanical engineering and from equipment investment.

This article tests the power of real options theory to explain investment under uncertainty, exploiting differences in the degrees of irreversibility and expandability between machinery and buildings. It reports estimates of investment equations for each asset class using a large sample of U.K. manufacturing industries, with results that are consis...

This paper tests the power of real options theory to explain investment under uncertainty, exploiting differences in the degree of irreversibility between machinery and buildings. It reports estimates of investment equations for each asset class using a large sample of UK manufacturing industries, with results that are consistent with the predictio...

No abstract available.

This paper presents an empirical study of the channels of influence from uncertainty to fixed investment suggested by real options theory. Using panel data from the Confederation of British Industry (CBI) Industrial Trends Survey, we report OLS estimates of the impact of uncertainty on investment where the regressors are augmented by cross-sectiona...

Standard models fail to explain variation in UK capital investment. This paper develops and tests a new theory based on the insights of Edmond Malinvaud, in which investment under uncertainty is adjusted to balance the cost of excess and deficient capacity. Using quarterly UK manufacturing data on two capital assets (machinery and building) over a...

This paper compares and contrasts capacity utilisation in the manufacturing sectors of the US, UK and other EU countries over three decades. It argues that corporate governance and the pressures of globalisation have led to a tighter capacity stance in the UK but not generally in the US or Europe. The paper further explores the nature of the UK exp...

This paper considers measures of uncertainty used in economic estimation. Our …rst contribution is to address the theoretical relationship between cross-section and time series measures, highlighting the reasons why these might diverge. In a subsequent empirical section, we compare measures of uncertainty, all of which are based on underlying data...

This paper considers measures of uncertainty used in economic estimation. Our first contribution is to address the theoretical relationship between cross-section and time series measures, highlighting the reasons why these might diverge. In a subsequent empirical section, we compare measures of uncertainty, all of which are based on underlying data...

Standard models fail to explain variation in UK capital investment. This paper develops and tests a new theory based on the insights of Edmond Malinvaud, in which investment under uncertainty is adjusted to balance the cost of excess and deficient capacity. Using quarterly UK manufacturing data on two capital assets (machinery and building) over a...

This paper compares pooled and non-pooled models of UK capital investment using the Confederation of British Industry’s (CBI) Industrial Trends Survey, focusing on the impact of uncertainty. The uncertainty measure is based on the cross sectional dispersion of optimism about the future business conditions in the industry in which the firm operates....

Economic theory suggests several plausible reasons why firms may employ hurdle rates for capital investment appraisal that differ from discount rates. Using a sample of business units from the PIMS data bank of North American companies we find that hurdle rates are frequently below and also frequently above matched data on discount rates. Using mul...

This paper assesses different ways of converting qualitative data obtained in surveys into quantitative indices for a number of economic variables. The research reported here focuses on the main UK employers' business survey for manufacturing - the CBI industrial trends survey. Six response variables are investigated - plant and machinery investmen...

This note addresses the reasons why additive and multiplicative demand uncertainty produce differently signed biases in output price as compared to the certainty case in two-period monopoly models. With multiplicative uncertainty the price should be set above the certainty level while for additive uncertainty the price should be lower than the cert...

the certainty level while for additive uncertainty the price should be lower than the certainty level. This note gives an intuitive explanation for the result after first presenting a parsimonious review of the two models. We also discuss which, if either, of the two models is more realistic.

In the present paper we estimate a model of price-cost inflation for Australia using business survey responses of firms in the manufacturing sector. The data allow us to circumvent a number of key statistical problems, related in particular to the measurement of costs and structural changes in the model. Equally important, the data allow a new and...

This paper uses direct evidence from reported hurdle rates and discount rates to assess theories of corporate investment appraisal. We find first that hurdle rates are frequently below discount rates, suggesting strategic or managerial behaviour. To test this we use probit analysis to discriminate between this group and an alternative group, where...

In public, Britain's Labour government extols the virtues of capital investment as one of the drivers in closing the productivity gap and generating growth and prosperity. However, the real test of commitment is whether investment has been made a key focus for policy and it seems clear that is has not. Certainly it has not attracted the attention a...

This paper uses a model of capital investment that ascribes a theoretical role to profitability and uncertainty in determining the capital-output ratio. Empirical implementation uses quarterly data from UK manufacturing over a thirty-year period, and unique co-integrating relationships are obtained for two asset classes: buildings and plant and mac...

'Stakeholding' is a term laden with many meanings. In this paper we attempt to put some order on the discourse by confining attention to the corporation. We assess the origins and the intellectual foundations of the 'shareholder versus stakeholder' debate. We ask whether and how 'stakeholding' might be a more logical or rational system, a fairer or...

This paper compares pooled models of capital investment with non-pooled models using the UK's Confederation of British Industry's (CBI) Industrial Trends Survey for the U.K., particularly focusing on the effect of uncertainty on investment. The uncertainty measure is based on the cross sectional dispersion of expectations. The panel data estimation...

This paper reports estimation of investment equations for two classes of fixed assets: plant & machinery and building for a large sample of UK manufacturing industries. It exploits the different degree of irreversibility that characterises these assets to test the power of real options theory to explain investment under uncertainty. Additionally, t...

This paper analyses the results of a special sample survey on risk and investment carried out using the European Union investment survey sampling frame for Ireland. The paper looks at decision-making by large manufacturing firms located in Ireland to see whether their investment decisions can be understood within the various models of risk that eco...

This paper finds that plant capital constraints on output in UK industry tend to persist for surprisingly long periods, reflecting a slow response of capital investment. The paper examines the conventional view that this response pattern may be explained by cost of adjustment. Using UK time-series data for a small number of industry groups, it is s...

While the theory examining the relationship between uncertainty and investment has suggested new research avenues, it has not had strong predictive power. Nevertheless, at the policy level the benefits for investment of a more stable economic climate are being emphasised. These considerations point to the need for empirical work. Accordingly, this...

This paper derives a model of capital investment that ascribes a theoretical role to profitability and uncertainty in determining the capital-output ratio. Using quarterly data from UK manufacturing over a thirty-year period, unique cointegrating relationships are obtained for two asset classes: buildings and plant and machinery. The corresponding...