The Ossified Economy: The Case of Germany, 1870-2020

Wim Naudé and Paula Nagler ()
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Paula Nagler: Erasmus University Rotterdam

No 15607, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We describe Germany's rise as an industrial power in the late 19th century through radical innovation and entrepreneurship, and contrast this with the post-World War II period. This latter period, although it contained the German economic miracle, was nevertheless a period during which innovation slowed down - a somewhat surprising conclusion, but consistent with the decline in business dynamism noted in a growing number of advanced economies. We document this decline using several innovation indicators, and offer four broad, interrelated explanations in a historical context: (i) the innovation system is locked into incremental innovation, (ii) the diffusion of technology is slowing down, (iii) the education system is subject to weaknesses, and (iv) entrepreneurship is stagnating. Implications for policy are noted. Our paper contributes to the literature on the decline in business dynamism and the "great stagnation", to the literature on the historical forces that determine innovation outcomes, and to the literature that seeks to identify what makes an entrepreneurial state.

Keywords: innovation; Germany; entrepreneurship; technology (search for similar items in EconPapers)
JEL-codes: N13 N14 O31 O33 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-09
New Economics Papers: this item is included in nep-ent, nep-gro, nep-his, nep-ino, nep-sbm and nep-tid
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