Despite massive digitization efforts, the German economy has experienced a marked slowdown in its productivity growth. In their new paper, NOUS member Lars Feld along with Désirée I. Christofzik, Steffen Elstner, and Christoph M. Schmidt empirically analyze three prominent explanations for this development. First, using a novel quarterly utilization-adjusted total factor productivity measure for the German economy, they 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, they 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.

The full paper is available here.