Unraveling the Productivity Paradox: Evidence for Germany

Christoph Schmidt, Lars Feld, Désirée Christofzik and Steffen Elstner

No 16187, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Despite massive digitization efforts, the German economy has experienced a marked slowdown in its productivity growth. This paper empirically analyzes three prominent explanations for this development. First, using a novel quarterly utilization-adjusted total factor productivity measure for the German economy, we find that the slowdown in U.S. productivity growth since the mid-2000s had a negligible impact on the German productivity trend. Second, the structural shift towards services in the German economy explains a sizeable share of the weaker aggregate productivity gains. This transformation process is associated with a strong labor market performance. And third, employing a novel identification procedure, we show that technological progress in the German information and communication technology (ICT) producing sector stimulates aggregate employment growth. Its effect on aggregate productivity is, however, small.

Keywords: Labor productivity; Technology shocks; Digitization; Structural vars; Purified tfp (search for similar items in EconPapers)
JEL-codes: C32 E24 O30 O40 (search for similar items in EconPapers)
Date: 2021-05
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Journal Article: Unraveling the Productivity Paradox: Evidence for Germany (2024)
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