The Origins of the German Current Account Surplus: Unbalanced Productivity Growth and Structural Change

38 Pages Posted: 2 Jul 2013

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Farshad R. Ravasan

Université Paris I Panthéon-Sorbonne

Andreas Woergoetter

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: June 2013

Abstract

The surge in the German current account surplus in the 2000s is often interpreted as the result of efficiency-enhancing structural reforms, especially in the labor market. However, this interpretation is puzzling because the growth rate of the German economy has been one of the lowest in the Euro area in the 2000s. Using empirical evidence and a simple theoretical two-sector model, the paper argues that the German surplus is closely linked to the increasing gap between productivity growth in manufacturing and services. Such 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 growth and the inability of productivity growth in manufacturing to create positive spill-over effects on services. Persistence of barriers to liberalization in services may partly explain these phenomena. The paper concludes that higher and more balanced growth could lead to an equilibrium reduction of the current account surplus.

Keywords: German current account surplus, structural change, unbalanced productivity change

JEL Classification: E21, E22, F31, F41, O40

Suggested Citation

Coricelli, Fabrizio and Ravasan, Farshad R. and Woergoetter, Andreas, The Origins of the German Current Account Surplus: Unbalanced Productivity Growth and Structural Change (June 2013). CEPR Discussion Paper No. DP9527, Available at SSRN: https://ssrn.com/abstract=2288492

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

Via Mattioli, 10
Siena, 53100
Italy

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Farshad R. Ravasan

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Andreas Woergoetter

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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