Although these data are far from perfect they suggest that, while within-firm pay differentials have accounted for some of the increased dispersion in pay across households, across-firm variations have made a larger contribution. Tackling the Productivity Puzzle  There has been no shortage of public policy ideas over recent years for boosting productivity growth. Reports by the IMF and OECD have suggested measures ranging from increased infrastructure spending to improved education and training programmes. 58  Earlier this year, the UK Government issued a Green  Paper setting out various pillars to support productivity. 59  And, most recently, here at the LSE the Growth  Commission produced their second report on measures to boost UK productivity. 60  In generic terms, these policy measures fall into three categories. First, there are measures which support all companies, irrespective of sector, region or characteristic. For example, last year’s Autumn Statement provided additional financial support for UK infrastructure spending, while in the Budget a couple of weeks ago the UK government announced plans for increased support for technical skills. Second, there are measures which support technological innovation – the creation and growth of frontier firms. One potentially important micro-economic measure supporting innovation is greater recognition of the importance of companies’ intangible assets, such as intellectual property (IP). These constitute an increasing fraction of companies’ total assets, but are not measured or valued in as consistent and coherent a way as tangible assets such as plants and machinery. This can have real costs for the companies concerned.
Notes: Scenario 1 assumes that half of firms with interest cover ratios of less than 1 exit the market. In scenario 2, only the lowproductivity half of firms with interest cover ratios of less than 1 exit the market. Chart 25: The estimated relationship between leverage and labour productivity  Source: Bahaj, Foulis, Gal and Pinter (2016). Notes: The figure plots the results from local regressions. The red line shows the results from local weighted scatter smoothing (LOWESS), the blue line shows the results from a third degree kernel weighted local polynomial smoothing where the gray area depicts the associated 95% bootstrapped confidence bands. Labour productivity is defined as the log of gross value-added per number of employees. During the local regression estimations, we trim the data by deleting the top and bottom 1% of estimated productivity and leverage values in order to mitigate problems of outliers. 35  All speeches are available online at www.bankofengland.co.uk/speeches  35  Chart 26: Distribution of average pay across companies  Source: ONS Research Database and Bank calculations. Notes: Series show wage deciles/percentiles. Chart 27: Distribution of firm level labour productivity, wages and profits in 2014  Sources: ONS Research Database and Bank calculations.