Working Paper: CEPR ID: DP16187
Authors: Christoph Schmidt; Lars P. Feld; Désiré Christofzik; Steffen Elstner
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
JEL Codes: O40; E24; C32; O30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| U.S. productivity growth slowdown (O49) | German productivity growth (O49) |
| U.S. technology shocks (O33) | German productivity growth (O49) |
| U.S. technology shocks (O33) | French productivity growth (O49) |
| U.S. technology shocks (O33) | Italian productivity growth (O49) |
| U.S. technology shocks (O33) | UK productivity growth (O49) |
| Technological progress in German ICT sector (O52) | Aggregate employment growth (E24) |
| Technological progress in German ICT sector (O52) | Aggregate productivity (E23) |
| Structural shift towards services (O14) | German productivity growth (O49) |
| Integration of six million workers (J89) | Aggregate productivity gains (O49) |