Sources of the German Productivity Demise – Tracing the Effects of Industry-Level ICT Investment
AbstractWhile the US experienced two successive labor productivity surges in 1995 and 2000, Germany’s productivity declined dramatically during the same period. We examine the sources of Germany’s productivity demise using the ifo industry growth accounting database that provides detailed industry-level investment information. While much attention has focused on the reduction in German labor hours, our data show that Information, Communication and Technology (ICT) investment in Germany was deeply lacking in the mid 1990’s as compared to the US. The transition to the new economy mitigated the German productivity slowdown, but did not reverse it. After 2000, we find that a recovery in Non-ICT investment was offset by a widespread collapse in German total factor productivity. Over half of German industries (accounting for almost 50 percent of German output) experienced negative TFP growth. This second major difference between the US and German industry performance explains Germany’s secular departure from the technological frontier.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1896.
Date of creation: 2007
Date of revision:
growth accounting; industry productivity analysis; information and communication technology;
Find related papers by JEL classification:
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
- L80 - Industrial Organization - - Industry Studies: Services - - - General
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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