Ruhr Economic Papers

Ruhr Economic Papers #796

The Consequences of U.S. Technology Changes for Productivity in Advanced Economies

by Steffen Elstner and Svetlana Rujin

RWI, 02/2019, 32 S./p., 8 Euro, ISBN 978-3-86788-924-7 DOI: 10.4419/86788924

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Abstract

Since at least the mid-2000’s, many advanced economies have experienced low productivity growth. This
development is often related to the declining productivity gains at the technology frontier, which is commonly assumed to be determined by the U.S. We challenge this explanation by studying the effects of changes in U.S. technology on the productivity level in other advanced economies. Overall, we find positive but small spillover effects of U.S. technology shocks. The elasticity of foreign labor productivity with respect to a one percent increase in the U.S. technology level is significantly lower than one for many countries. The recent U.S. productivity slowdown, therefore, had a limited effect on productivity developments in advanced economies. Furthermore, our results suggest that institutional factors are not able to explain cross-country differences in the size of the spillover effects. If any, regulation of the service sector seems to play a role.

JEL-Classification: O40, E24, C32, F00

Keywords: Labor productivity; international spillover effects; technology shocks; structural VARs

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