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Germany’s Continued Productivity Slump: An Industry Analysis

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  • Theo S. Eicher
  • Thomas Strobel

Abstract

US productivity growth surged twice post 1995 and post 2000. In contrast Germany registered two successive productivity reductions during that same period of time. Previous analysis of the post-2000 decline has been limited, however, by the short time series of the available data. In this paper we extend the Ifo Industry Growth Accounting Database that provides detailed industry-level investment information up to 2004. While much attention has focused on the reduction in German labor hours, our post-2000 data shows that a fledgling recovery in German non-ICT investment was offset by a widespread collapse in German total factor productivity. Almost half of German industries (accounting for over 45 percent of German output) did not experience positive TFP growth post 2000. Industries that constitute over a quarter of Germany’s value-added exhibited negative labor productivity growth during the same period. The negative German productivity trend is thus continuing, which accelerates the country’s departure from the productivity frontier.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 58.

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Date of creation: 2008
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Handle: RePEc:ces:ifowps:_58

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Keywords: Growth accounting; industry productivity analysis; information and communication technology;

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  1. Inklaar, Robert & Mahony, Mary O' & Timmer, Marcel, 2003. "ICT and Europe's productivity performance industry-level growth account comparisons with the United States," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen 200368, Groningen Growth and Development Centre, University of Groningen.
  2. Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2003. "ICT and Productivity in Europe and the United States: Where Do the Differences Come From?," Economics Program Working Papers, The Conference Board, Economics Program 03-05, The Conference Board, Economics Program.
  3. Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2003. "The Contribution of ICT-Producing and ICT-Using Industries to Productivity Growth: A Comparison of Canada, Europe and the United States," International Productivity Monitor, Centre for the Study of Living Standards, Centre for the Study of Living Standards, vol. 6, pages 56-63, Spring.
  4. van Ark, Bart & Inklaar, Robert, 2006. "Catching up or getting stuck? Europe's troubles to exploit ICT's productivity potential," GGDC Research Memorandum, Groningen Growth and Development Centre, University of Groningen GD-79, Groningen Growth and Development Centre, University of Groningen.
  5. Carol Corrado & John Haltiwanger & Dan Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number corr05-1.
  6. MartinNeil Baily & Robert Z. Lawrence, 2001. "Do We Have a New E-conomy?," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 308-312, May.
  7. Theo Eicher & Oliver Röhn, 2007. "Sources of the German Productivity Demise – Tracing the Effects of Industry-Level ICT Investment," CESifo Working Paper Series 1896, CESifo Group Munich.
  8. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
  9. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2005. "Growth of U.S. Industries and Investments in Information Technology and Higher Education," NBER Chapters, National Bureau of Economic Research, Inc, in: Measuring Capital in the New Economy, pages 403-478 National Bureau of Economic Research, Inc.
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