POID will focus on trying to increase productivity in the UK, and is part of a wider £30m ESRC programme to solve issues about the nation’s productivity, living standards, wage growth and economic recovery post-Covid-19.

ESRC has contributed £4m of the total funding for POID, with the LSE making up the other £1m.

Professor John Van Reenen will head the POID, and is a former director of the Centre for Economic Performance. His previous work has focused on the causes and consequences of innovation for economic life, both in terms of ‘soft’ innovation such as changes in management practices and ‘hard’ technologies such as artificial intelligence.

A new productivity institute has also been set up at the University of Manchester by the ESRC, and the ESRC has existing investments in the Productivity Insights Network, the Enterprise Research Centre, the What Works Centre for Local Economic Growth, and the Productivity Outcomes of Workplace Practice, Engagement and Learning Hub at Strathclyde Business School.

Professor Jennifer Rubin, executive chair at the ESRC, said: “The institute and programme will address low productivity by traditional measures, but also go beyond these measures to explore wider issues, including variation across places and what can be done to improve productivity for the UK as a whole.

“The aim is to ensure that advances in knowledge inform the significant decisions and interventions that policy makers, businesses and individuals must make to improve productivity, and to achieve the attendant improvements in wages and living conditions that doing so can drive.”

Professor Simon Hix, pro-director for Research at LSE, said: “We very much welcome the opportunity the ESRC has given LSE to apply cutting-edge research in the social sciences to help solve what is perhaps the UK’s most difficult economic policy challenge of our times.”