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The German Productivity Paradox - Facts and Explanations

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  • Steffen Elstner
  • Lars P. Feld
  • Christoph M. Schmidt

Abstract

Despite massive digitization efforts, the German economy has experienced a marked slowdown in its productivity growth. This paper analyzes the reasons behind this disconcerting development. A major factor is the turnaround of the labor market that commenced around 2005. The successful integration of five million predominantly low-productivity workers into the labor market induced an attenuating effect on productivity growth. This does not explain the slowdown entirely, however. As a potentially important countervailing force, technological advances associated with digitization would have had the potential to lift productivity growth more strongly, but they frequently translated into employment growth instead.

Suggested Citation

  • Steffen Elstner & Lars P. Feld & Christoph M. Schmidt, 2018. "The German Productivity Paradox - Facts and Explanations," CESifo Working Paper Series 7231, CESifo.
    • Handle: RePEc:ces:ceswps:_7231
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    3. Schreiber Sven & Schmidt Vanessa, 2022. "Missing growth measurement in Germany," German Economic Review, De Gruyter, vol. 23(3), pages 493-527, August.
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    6. Breuer Sebastian & Elstner Steffen, 2020. "Germany’s Growth Prospects against the Backdrop of Demographic Change," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(5), pages 565-605, October.
    7. Karpagam Subramanian & Shauhrat S. Chopra & Weslynne S. Ashton, 2021. "Capital‐based life cycle sustainability assessment: Evaluation of potential industrial symbiosis synergies," Journal of Industrial Ecology, Yale University, vol. 25(5), pages 1161-1176, October.
    8. Fehr, Hans & Feldman, Maria, 2024. "Financing universal health care: Premiums or payroll taxes?," European Economic Review, Elsevier, vol. 166(C).
    9. Elstner, Steffen & Grimme, Christian & Kecht, Valentin & Lehmann, Robert, 2022. "The diffusion of technological progress in ICT," European Economic Review, Elsevier, vol. 149(C).
    10. Feld, Lars P. & Fuest, Clemens & Haucap, Justus & Schweitzer, Heike & Wieland, Volker & Wigger, Berthold U., 2020. "No retreat into fortress Europe!," Kronberger Kreis-Studien 66e, Stiftung Marktwirtschaft / The Market Economy Foundation, Berlin.
    11. Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Truger, Achim & Wieland, Volker, 2019. "Den Strukturwandel meistern. Jahresgutachten 2019/20 [Dealing with Structural Change. Annual Report 2019/20]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201920, February.
    12. Parteka, Aleksandra & Kordalska, Aleksandra, 2023. "Artificial intelligence and productivity: global evidence from AI patent and bibliometric data," Technovation, Elsevier, vol. 125(C).
    13. Maria Tsiapa, 2023. "A holistic approach of the labour productivity slowdown in the regions of the European Union," Papers in Regional Science, Wiley Blackwell, vol. 102(3), pages 507-531, June.
    14. Serguei Kaniovski & Thomas Url & Helmut Hofer & Viola Garstenauer, 2021. "A Long-run Macroeconomic Model of the Austrian Economy (A-LMM 2.0). New Results (2021)," WIFO Studies, WIFO, number 67377, March.
    15. D. Dessì & R. Paci, 2023. "The impact of Global Value Chains participation on countries' productivity," Working Paper CRENoS 202305, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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    More about this item

    Keywords

    labor productivity; labor markets; technology shocks; digitalization; structural VARs;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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