Searching for the \"productivity slowdown’: some surprising findings from West German manufacturing

Abstract

We test the hypothesis of a negative long-term trend and/or a structural break in total factor productivity (TFP) after the first oil price shock for West German manufacturing industries within an econometric model based on a flexible cost function with capital as a quasi-fixed factor. After adjusting TFP growth for scale economies and varying capacity utilization this hypothesis is not supported by our empirical findings for the great majority of industries studied, whereas the hypothesis that the (log-)level of TFP follows a random walk with drift is not rejected by various statistical tests. -Authors