Productivity Growth in the United States and Germany: Is Germany Falling Further behind?
AbstractThe long-term development in productivity in an economy is the main indicator in an assessment of the outlook for economic development. In theory, countries that lag behind the leading countries in productivity should gradually succeed in closing that gap. Since the mid-1990s the Federal Republic of Germany has not been able to continue the process of catching up with the trend in productivity in the United States that was typical until then. In past decades the development in Germany compared with the United States was dominated by the process of introducing best-practice technologies, for example modern information and communications technologies, but that has evidently faltered now. That is still the conclusion to be drawn after the introduction of the new methods of calculating the national accounts, which were expected to reduce the methodological differences in the assessment of productivity between Germany and the United States. However, the gap in productivity growth between the two economies may be expected to shrink again in the medium term, partly because the structural reforms on the labour market and the investment in modern information and communications technologies made in the past should have a positive effect. Productivity growth matters in the long run. As only the wealth created can be distributed the speed at which the efficiency of an economy is increasing will mark the limit for this distribution. So without a clear rise in efficiency the population in a country cannot expect their material prosperity to continue to rise. Owing to this fundamental interrelation determining the medium to long-term growth rate in productivity, and here especially the productivity of labour, is of crucial importance. Since the mid-1990s the typical process of catching up with the development in productivity in the United States has been interrupted in Germany [...]
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Bibliographic InfoArticle provided by DIW Berlin, German Institute for Economic Research in its journal Weekly Report.
Volume (Year): 1 (2005)
Issue (Month): 24 ()
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