The German Productivity Paradox

2018, a consortium of German research organisations addressed the problem “why the German economy has experienced a marked slowdown in productivity growth in recent years, despite the general perception that increasing digitization causes rapid technological change.” (p. 34)

The analysis provides the following list of explanations (pp. 34-35):

1. Only small spillover effects from U.S. technology changes on German labor productivity.
2. A sizeable part of the slowdown in German productivity growth is a side effect of the labor market performance since the year 2005. The successful integration of five million people into the labor market caused an attenuating effect on productivity growth as many of these new workers exhibit comparatively low levels of productivity.
3. Technological progress originating in the ICT-producing sector has significant positive effects on GDP and employment. The net effect on labor productivity, however, is modest. Consequently, increasing digitization leads to higher production and employment, but not to sizeable higher productivity
4. For the years after 2012 technological progress in the ICT-producing sectors seems below which might also be an explanation for the German productivity paradox.

The report has been published by

• RWI - Leibniz-Institut für Wirtschaftsforschung, Essen, Germany
• Ruhr-Universität Bochum (RUB), Department of Economics, Bochum, Germany
• Technische Universität Dortmund, Department of Economic and Social Sciences, Dortmund, Germany
• Universität Duisburg-Essen, Department of Economics, Essen, Germany

^{Source:
Elstner, Steffen; Lars P. Feld; Christoph M. Schmidt 2018}

^{The German Productivity Paradox – Facts and Explanations. Essen, Germany. (Ruhr Economic Papers #767).}

^{Read more:
http://en.rwi-essen.de/media/content/pages/publikationen/ruhr-economic-papers/rep_18_767.pdf}