The National Institute of Economic and Social Research (NIESR), established in 1938, is Britain's oldest independent economic research institute. The institute is a London-based independent UK registered charity that carries out academic research of relevance to business and policy makers, both nationally and internationally.
The institute receives no core funding from government or other sources. The bulk of funding comes from research projects awarded or commissioned by a variety of sources, including government, all acknowledged in full in their published materials. The terms of their grants prohibit any involvement from funding bodies in determining or influencing content. Funders include government departments and agencies, the research councils (particularly the Economic and Social Research Council (ESRC)), charitable foundations, the European Commission, and the private sector.
The institute is a partner with the ESRC's Centre for Macroeconomics and The Productivity Institute, and is responsible for the Productivity Commission.[https://www.niesr.ac.uk/partner/productivity-commission It also has close ties with both Cardiff and Glasgow universities.
History Origins (1930s) The foundation of NIESR was preceded by an initiative launched by Sir Josiah Stamp in the early 1930s, Jones, K. (1988) ‘Fifty Years of Economic Research: a Brief History of the National Institute of Economic and Social Research 1938-88’, National Institute Economic Review, 124, pp. 36–62. Stamp, who was the President of the London, Midland and Scottish Railway, aimed to develop a central unit of British origin with funds under its control to supplement, and eventually replace, the help given by the Rockefeller Foundation (then the primary source of research funds in the British social sciences), Jones, K. (1988) ‘Fifty Years of Economic Research: a Brief History of the National Institute of Economic and Social Research 1938-88’, National Institute Economic Review, 124, pp. 36–62.. Stamp sought to develop an increasingly large research effort in economics and related subjects in response to the general feeling that the existing emphasis on theory needed to be balanced by an increase in applied research, Ritchie, R (1969). An Institute for Research on Public Policy: A Study Prepared for the Government of Canada. Information Canada, p21.
Stamp garnered support from prominent academics including William Beveridge, Director of the London School of Economics (LSE); Henry Clay, Economic Adviser to the Bank of England; and Hubert Henderson, Secretary of the Economic Advisory Panel . In 1934–1935, Stamp, with the assistance of Noel Hall, attempted to secure funding from several trusts, including Halley Stewart, Leverhulme, Rockefeller, and the Pilgrim Trust. The Halley Stewart trustees provided an initial grant of £600 to explore the formation of an institute, Jones, K. (1988) ‘Fifty Years of Economic Research: a Brief History of the National Institute of Economic and Social Research 1938-88’, National Institute Economic Review, 124, pp. 36–62..
In setting up the institute, the objective was the formation of a national organisation for carrying out independent economic research, as existing university developments, such as LSE's, were not perceived as meeting this need. Beveridge eventually became actively involved, suggesting the inclusion of the word 'social' in the title, thus changing the proposed National Institute of Economic Research to the National Institute of Economic and Social Research, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research..
The Institute was founded in 1938. Initial financial support was secured from the Pilgrim Trust, the trustees of the late Lord Leverhulme, and the Halley Stewart trustees, with the Rockefeller Foundation matching their contributions pound for pound, totalling £10,000 annually for seven years, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research..
Early Research and Wartime Following the formal establishment, research schemes that focused heavily on quantitative economics were immediately solicited, with a small grant being made to a group of economists at Cambridge under John Maynard Keynes' chairmanship for work on economic change, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research.. Other areas of study included national income, unemployment, location of industry, credit and money markets, and commercial policy. The investigation into national income culminated in the publication of Studies in the National Income 1924–1938, edited by A.L. Bowley, in 1942. This marked the first publication in NIESR's series of economic and social studies, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research..
At the outbreak of World War II, most staff members entered government service, resulting in the suspension or curtailment of several investigations. From 1941 until 1952, the business of the Institute was conducted by an Executive Committee, with the Secretary, Miss Feodora Leontinoff (later Mrs. Stone), playing an active role. Sir Henry Clay, who succeeded Lord Stamp as Chairman in 1941, carried out the duties of a Director throughout the war and early postwar years. During the war, the Institute was able to recruit able immigrants, leading to pioneering comparisons of industrial productivity in Britain and the United States by Laci Rastas, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research..
Postwar Developments and Macroeconomic Shift After the war, NIESR decided to focus its limited resources on internal research, concentrating on the structure and productivity of the national economy. This emphasis was influenced by the growth of statistical data made available by the government. In 1955, NIESR made a significant change in direction by deciding to take on the function of a Konjunktur (business cycle) institute. This shift, driven by Christopher Dow and Bryan Hopkin, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research., aimed to publish regular analyses and forecasts of the economy to provide an independent check on the government's assessments, particularly those from HM Treasury. This ambition was backed by Sir Robert Hall, the Economic Adviser to the Government. This new venture led to the launch of the National Institute Economic Review (NIER) in January 1959, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research.. The forecasts published in the Review were typically based on the assumption of unchanged policies, serving to highlight potential needs for policy changes.
NIESR achieved prominence in macroeconomic modelling in the 1970s and 1980s. By 1975/6, public funds accounted for about 80 per cent of NIESR’s total income, although this share declined significantly to just under half by 1987/8. NIESR developed its own internal model, Model 6, which incorporated fully endogenous wage and exchange-rate movements, and later Model 8, which included forward-looking expectations. In 1983, when the Economic and Social Research Council (ESRC, renamed from SSRC in 1984) established a Macroeconomic Modelling Bureau at the University of Warwick, NIESR collaborated fully, and their model was found to be the most 'data coherent' among those examined, Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research..
Areas of Research NIESR focuses on producing high-quality, policy-relevant research to inform debate and improve understanding of key economic and social issues. Its core focus is on the United Kingdom, however – given the UK is a relatively small open economy, as well as being a global financial centre – it uses its modelling expertise to understand the effect any changes in the global context may have.
NIESR’s research can be broken down into the following areas: Macro-financial policy frameworks Work here is focused on UK Monetary and fiscal policy – how they interact, how they have adapted to changing conditions and how they have performed. Topics that continue to be explored include the role of quantitative easing and quantitative tightening, the sustainability of the public finances, factors affecting inflation, and the global financial system. Catalysts of long-run growth and competitiveness What are the structural forces that determine the UK’s capacity to grow and compete? Topics here include analysing the UK’s poor productivity performance - working with The Productivity Institute and hosting the Productivity Commission[https://www.niesr.ac.uk/partner/productivity-commission to investigate factors and propose solutions – as well as understanding the labour market, climate change, international trade factors and issues affecting demographics, such as migration. Regional and distributional analysis The focus on people and places, and the impact that economic policy decisions have on them, grounds NIESR’s research so it connects directly to policy debates. NIESR has a suite of regional and distributional economic models that it uses to explore the drivers of regional productivity and the effects of policies on households across income levels. Macroeconomic Modelling NiGEM The National Institute Global Econometric Model (NiGEM) is recognized as the leading global macroeconomic model. It is a peer-reviewed tool that has evolved over more than 30 years of regular use. History and Origins NiGEM was first developed in 1987Hantzsche, A., Lopresto, M. & Young, G. (2018). Using NiGEM in uncertain times: Introduction and overview of NiGEM. National Institute Economic Review, 244, pp. R1–R14 as part of a new approach to world economy forecasting and the analysis of policy cooperation possibilities among major countries. The model was devised by Simon Wren-Lewis., Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research. The global model's starting point was the Treasury's world model, which NIESR adapted and expanded in various ways. NiGEM quickly became the leading world model developed in the UK and one of the leading world models used internationally., Jones, K. (1998). Sixty Years of Economic Research: A brief history of the National Institute of Economic and Social Research 1938–98. NIESR Occasional Papers 52. London: National Institute of Economic and Social Research Major advances in its specification continued in the 1990s, with Ray Barrell in charge of this work at the Institute, often in cooperation with the London Business School. Structure and Scope