1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Structural Change and the Current Account

The Case of Germany

Using empirical evidence from panel analysis of current account dynamics and of bilateral trade balances, the paper argues that the large German current account surplus during the 2000s can be explained by an increasing gap between productivity growth in manufacturing vis-à-vis services. Such a gap is due not only to improvements in the manufacturing sector but also to a significant slowdown of productivity growth in services. Therefore, despite the success in export markets, the German surplus may signal long-run weaknesses associated with constraints on service sector productivity growth and the inability of productivity growth in manufacturing to create positive spill-over effects on services. Persistence of barriers to liberalisation in services as well as the dominant type of technological progress in manufacturing, based on improving the efficiency of existing products, may partly explain these phenomena. A key factor behind these sectoral differences is the education system, which relies on highly specialised vocational schools, generating high returns for on the job training and creating incentives for efficiency gains in existing products and sectors. The paper concludes that there is room for comprehensive structural policies consistent with an equilibrium reduction in the current account surplus, accompanied by higher and more balanced growth.

English

Keywords: current account, manufacturing, Germany, services, productivity growth differences
JEL: H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions; F32: International Economics / International Finance / Current Account Adjustment; Short-term Capital Movements; F41: International Economics / Macroeconomic Aspects of International Trade and Finance / Open Economy Macroeconomics; H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies; O40: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Economic Growth and Aggregate Productivity: General; K31: Law and Economics / Other Substantive Areas of Law / Labor Law; K20: Law and Economics / Regulation and Business Law / Regulation and Business Law: General; E22: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Investment; Capital; Intangible Capital; Capacity; G18: Financial Economics / General Financial Markets / General Financial Markets: Government Policy and Regulation; E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error