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The German Productivity Paradox: A Homegrown Affair


Despite massive digitization efforts, the German economy has experienced a marked slowdown in its productivity growth. While at first glance this trend seems to track the slowdown in U.S. productivity growth since the mid-2000s, this deceleration only had a negligible impact on the developments in Germany. Rather, an important share of this trend reflects the combination of a strong labor market performance with the structural shift towards services in the German economy. A large part of the productivity paradox can be resolved by the observation that the notable technological progress in the German information and communication technology (ICT) producing sector tends to stimulate aggregate employment growth in step with production growth, thereby consuming its effect on aggregate productivity.

Publication, November 22