The German Productivity Paradox - Facts and Explanations
50 Pages Posted: 31 Oct 2018
Date Written: 2018
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
JEL Classification: O400, E240, C320
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