The Consequences of U.S. Technology Changes for Productivity in Advanced Economies, with Steffen Elstner
Macroeconomic Dynamics, forthcoming
Since at least the mid-2000s, many advanced economies have experienced low productivity growth. This development is often related to declining productivity gains at the technology frontier, which is largely determined by the US. We challenge this explanation by studying the effects of US technology shocks on productivity levels in advanced economies. We find positive but small spillovers of US technology shocks. For many countries, the elasticity of their productivity with respect to a 1% increase in the US technology level is significantly lower than 1. Thus, the recent US productivity slowdown must have had a limited effect on productivity developments in advanced economies. Nevertheless, after 5 years, the degree of productivity spillovers varies across countries. Therefore, we analyze the role of institutions in shaping these results. Our findings suggest that isolated institutional characteristics are not able to explain the observed various spillover degrees.
Growth Prospects and the Trade Balance in Advanced Economies, with Ansgar Belke & Steffen Elstner
Does an improvement in growth prospects (technological news shock) lead to a fall in the trade balance? We introduce a novel news shock identification scheme and obtain in a panel vector autoregression (VAR) for the G7 countries the following results. Positive news shocks have negative effects on the trade balance in the United States and Japan. However, in other G7 countries, the effects are positive to a great extent. The differences in trade balance dynamics are mainly due to heterogeneous reactions of labour markets and wealth effects. Further, the terms of trade and exchange rate movements play an important role in explaining the results. Therefore, policy recommendations aimed at reducing the trade imbalances through productivity-enhancing reforms in advanced economies might not entail the targeted effects.
How do international labor markets respond to a technology shock and what is the main transmission channel across countries with different labor market institutions? To answer these questions, I decompose the responses of total hours worked to a technology shock into movements along the extensive and the intensive margins. Overall, my analysis shows that technology shocks have a negative effect on total hours. This effect is stronger in countries with flexible labor markets, where the adjustment takes place along both margins. In contrast, the responses of total hours are smaller in countries with strict labor market legislation, where labor adjustment takes place along the intensive margin. These differences can be linked to the strictness of institutions that target quantity and price adjustments in the labor market.
Presented at the: 5th Conference of the International Association for Applied Econometrics (Montreal, 2018), 22nd International Conference on Macroeconomic Analysis and International Finance (Rethymno, 2018), 11th RGS Doctoral Conference in Economics (Essen, 2018), Loire Valley Institute of Advanced Studies and Orléans Economics Center: "Globalization and Growth in Eurozone: New Challenges" (Orléans, 2017), RWI Brown Bag Seminar (Essen, 2017), Annual Conference of the European Economics and Finance Society (Ljubljana, 2017).