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Sources of the German Productivity Demise: Tracing the Effects of Industry‐Level Information and Communication Technology Investment

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  • Theo S. Eicher
  • Oliver Roehn

Abstract

. While the United States experienced two successive labor productivity surges in 1995 and 2000, Germany's productivity declined dramatically during the same period. We examine the sources of Germany's productivity demise using the ifo industry growth accounting database that provides detailed industry‐level investment information. While much attention has focused on the reduction in German labor hours, our data show that information and communication technology (ICT) investment in Germany was deeply lacking in the mid‐1990s as compared with the United States. The transition to the new economy mitigated the German productivity slowdown, but did not reverse it. After 2000, we find that a recovery in Non‐ICT investment was offset by a widespread collapse in German total factor productivity. Over half of the German industries (accounting for almost 50 per cent of German output) experienced negative total factor productivity growth. This second major difference between the United States and German industry performance explains Germany's secular departure from the technological frontier.

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  • Theo S. Eicher & Oliver Roehn, 2007. "Sources of the German Productivity Demise: Tracing the Effects of Industry‐Level Information and Communication Technology Investment," German Economic Review, Verein für Socialpolitik, vol. 8(2), pages 211-236, May.
    • Handle: RePEc:bla:germec:v:8:y:2007:i:2:p:211-236
    DOI: 10.1111/j.1468-0475.2007.00405.x
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    1. Stephen D. Oliner & Daniel E. Sichel, 2000. "The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 3-22, Fall.
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    7. Alessandra Colecchia & Paul Schreyer, 2002. "ICT Investment and Economic Growth in the 1990s: Is the United States a Unique Case? A Comparative Study of Nine OECD Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 408-442, April.
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    Cited by:

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    2. Böhringer, Christoph & Moslener, Ulf & Oberndorfer, Ulrich & Ziegler, Andreas, 2012. "Clean and productive? Empirical evidence from the German manufacturing industry," Research Policy, Elsevier, vol. 41(2), pages 442-451.

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