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The German productivity paradox: Facts and explanations

Steffen Elstner (), Lars Feld () and Christoph Schmidt

No 767, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

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.

Keywords: labor productivity; labor markets; technology shocks; digitalization; structural VARs (search for similar items in EconPapers)
JEL-codes: O40 E24 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-eur and nep-mac
Date: 2018
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