Economics at your fingertips  

The Rise and Fall of German Productivity Software Investment as the Decisive Driver

Theo Eicher () and Thomas Strobel ()

CESifo Economic Studies, 2008, vol. 54, issue 3, 386-413

Abstract: Investments in Information and Communication Technology (ICT) are the source of the global growth resurgence that commenced in the mid-1990s. Most studies focus on broad ICT measures, or on computer hardware; here we examine the contributions of software-intensive industries to productivity growth. The price of prepackaged software has been falling exponentially since the 1960s, which has led to substitutions towards software investments, and to reductions in the total cost of ICT hardware investments. We use novel German ICT investment data to show that software-intensive industries have been the crucial determinant of German productivity growth since 1995. Not only did these industries contribute strongly to productivity growth, but they offset declining investments and productivities in other industries. Post 1995, other industries' investments in new equipment per worker collapsed, while software-intensive industries' capital investments rose steadily to generate over half of Germany's productivity growth by 2000-04. We document sharply diverging productivity paths for software-intensive and other (non-software-intensive) industries. Post 1991, total factor productivity (TFP) declined secularly in other industries to generate a −0.39 percent drag on German labor productivity by 2000-04, while TFP in software-intensive industries rose steadily to contribute 35 percent to German labor productivity growth by the same period. Overall, the results combine to paint a stark picture of rising capital per worker and TFP growth in software-intensive sectors, contrasting with falling capital per worker and increasingly negative TFP growth in other sectors. About two-thirds of the impact from software-intensive industries is generated by investments in prepackaged and purchased custom software. (JEL codes: O03, O04) Copyright , Oxford University Press.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

CESifo Economic Studies is currently edited by Gerhard Illing

More articles in CESifo Economic Studies from CESifo Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ( this e-mail address is bad, please contact ) and Christopher F. Baum ().

Page updated 2021-05-29
Handle: RePEc:oup:cesifo:v:54:y:2008:i:3:p:386-413