March Ireland’s economy needs urgent reform for future generations

 University of Galway economist calls for a stronger focus on homegrown entrepreneurs, innovation and talent for high living standards

 Ireland’s economic model is in need of urgent reform to sustain high standards of living for future generations, research from University of Galway has warned.

 The study raises the spectre of global investment patterns shifting due to geopolitical developments, leaving Ireland increasingly depend on home-grown technological progress to drive income growth.

 The research - commissioned by Stripe founders John and Patrick Collison - shows that the Irish economy has one of the highest productivity rates in the world, with decades of growth driving rising incomes and high living standards. 

 It notes that over the past 50 years, real income per person has tripled, rising from about €17,500 in 1970 to over €53,000 in 2023, with economic growth largely driven by foreign direct investment (FDI) from the United States.

 Author of the report, Professor of Economics at University of Galway, Alan Ahearne, echoed warnings that Ireland is heavily reliant on a relatively small number of foreign-owned multinational companies.

 The study states that Ireland urgently needs to build a world-class entrepreneurial ecosystem to improve its track record at forging indigenous high-growth firms with the potential to develop innovative products and services based on advanced technology. 

 Professor Alan Ahearne, J.E. Cairnes School of Business and Economics, University of Galway, said: “The most important ingredient for a successful entrepreneurial ecosystem is human capital and talent. Ireland, which in the past has used tax policy to attract physical capital from abroad (FDI), should now consider how to use tax policy to attract human capital from abroad to augment our existing talent base.” 

 In a statement to coincide with the publication of the research, Stripe founders John and Patrick Collison, said: “We welcome this research and its empirical contribution to the discussion around Ireland’s economic future. In an increasingly competitive and volatile world, putting in place the systems and conditions to accelerate scientific and technological progress will be critical for future living standards in Ireland.”

 The research pointed to the crucial role of talent and human capital in creating and fostering self-reinforcing clusters of innovation. 

 Among the policy levers available to Irish policymakers, the research paper noted the potential use of tax policies to attract skilled professionals from abroad, similar to approaches recently introduced in other countries, and that they will likely prove the most impactful.   

 The report is available here.

 Ends