Working Paper The Ifo industry growth accounting database

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1 econsor Der Open-Access-Publikaionsserver der ZBW Leibniz-Informaionszenrum Wirschaf The Open Access Publicaion Server of he ZBW Leibniz Informaion Cenre for Economics Roehn, Oliver; Eicher, Theo S.; Srobel, Thomas Working Paper The Ifo indusry growh accouning daabase CESifo working paper, No Provided in Cooperaion wih: Ifo Insiue Leibniz Insiue for Economic Research a he Universiy of Munich Suggesed Ciaion: Roehn, Oliver; Eicher, Theo S.; Srobel, Thomas (2007) : The Ifo indusry growh accouning daabase, CESifo working paper, No This Version is available a: hp://hdl.handle.ne/10419/25960 Nuzungsbedingungen: Die ZBW räum Ihnen als Nuzerin/Nuzer das unengelliche, räumlich unbeschränke und zeilich auf die Dauer des Schuzrechs beschränke einfache Rech ein, das ausgewähle Werk im Rahmen der uner hp://www.econsor.eu/dspace/nuzungsbedingungen nachzulesenden vollsändigen Nuzungsbedingungen zu vervielfäligen, mi denen die Nuzerin/der Nuzer sich durch die erse Nuzung einversanden erklär. Terms of use: The ZBW grans you, he user, he non-exclusive righ o use he seleced work free of charge, erriorially unresriced and wihin he ime limi of he erm of he propery righs according o he erms specified a hp://www.econsor.eu/dspace/nuzungsbedingungen By he firs use of he seleced work he user agrees and declares o comply wih hese erms of use. zbw Leibniz-Informaionszenrum Wirschaf Leibniz Informaion Cenre for Economics

2 THE IFO INDUSTRY GROWTH ACCOUNTING DATABASE OLIVER ROEHN THEO S. EICHER THOMAS STROBEL CESIFO WORKING PAPER NO CATEGORY 5: FISCAL POLICY, MACROECONOMICS AND GROWTH FEBRUARY 2007 An elecronic version of he paper may be downloaded from he SSRN websie: from he RePEc websie: from he CESifo websie: Twww.CESifo-group.deT

3 CESifo Working Paper No THE IFO INDUSTRY GROWTH ACCOUNTING DATABASE Absrac In his paper we presen a new daabase ha allows deep indusry-level growh accouning from The daabase allows for he firs complee analysis of he German indusry performance drivers based on he conribuions of 12 asse ypes in 52 differen indusries. The indusry sources of produciviy and oupu growh are crucial o he undersanding of he ransformaion of he German economy from manufacuring o informaion echnology and service indusries. The daabase enables researchers o develop an adequae picure of he sources of growh using sandard growh accouning echniques. We formally documen he new daa series and is origins, wih special focus on he capial sock and capial service daa. JEL Code: O4, O5. Keywords: growh accouning, indusry produciviy analysis. Oliver Roehn Ifo Insiue for Economic Research a he Universiy of Munich Poschingersr Munich Germany Theo S. Eicher Deparmen of Economics Universiy of Washingon 301 Savery Hall, Box Seale WA USA Thomas Srobel Ifo Insiue for Economic Research a he Universiy of Munich Poschingersr Munich Germany January 2007 We hank Elke Kronjäger for sharing Ifo indusry-level asse-specific invesmen daa, Paul Schreyer for commens, Rober Inklaar for providing us wih he unpublished German capial sock levels from he Groningen Indusry Growh Accouning Daabase, and he German Science Foundaion Gran # for financial suppor.

4 1. Inroducion Growh accouning exercises are popular and ofen employed in produciviy analyses o undersand he underlying dynamics ha deermine he economic forunes of counries. The need o illuminae he ransiion of indusrialized naions from pure manufacuring o informaion and service based economies has emphasized he imporance of growh accouning exercises as a means o idenify srucural shifs early and comprehensively. Key o such analyses is indusry level invesmen daa ha disinguishes beween all relevan asses ypes. In he US and oher OECD counries, growh accouning exercises allow researchers o idenify he effecs of informaion and communicaion echnology (ICT) invesmen on aggregae oupu and produciviy. In Germany, however, no such daa exiss a he 52 indusry level. In his paper we presen he Ifo Indusry Growh Accouning Daabase ha provides consisen invesmen and capial sock daa for 12 invesmen asses in 52 indusries from 1991 onward. 1 The 12 asses are comprised of 3 ICT asses (Compuer and Office Equipmen; Communicaion Equipmen; Sofware) and 8 addiional equipmen asses (Meal Producs; Machinery; Elecrical Generaion and Disribuion; Insrumens, Opics and Waches; Furniure, Music and Spors Equipmen; Oher Machines and Equipmen; Auomobiles; Oher Vehicles) as well as invesmens in Buildings and Srucures. The 52 indusries roughly correspond o he 2-digi indusry-level NACE classificaion. The Ifo Indusry Growh Accouning Daabase is derived from he Ifo Invesorenrechnung, which provides indusry invesmen daa based on invesmens in 100 differen subasses. This deailed level of informaion allows us o allocae invesmens by asse ype o each indusry, using he Ifo invesmen flow marix. We hen use Jorgenson, Ho and Siroh s (2005) growh accouning conceps o consruc capial sock and capial service esimaes for asses and indusries. The Ifo Indusry Growh Accouning Daabase has hree unique feaures. Firs, i provides informaion on an unprecedened number of German capial socks and capial services a he indusry level. Second, indusry-level asses include hree differen ypes of ICT asses (Compuer and Office Equipmen; Communicaion Equipmen; Sofware), which are of paricular ineres o undersand he produciviy performance of indusries in he pas decade. I is he firs ime ha his level of ICT disaggregaion is available a he German 52 indusry level. Third, he deailed disaggregaion of he differen asse ypes and marginal produciviies (measured as user coss) allows researchers o consruc he mos accurae 1 The daabase is available a hp://faculy.washingon.edu/e/growhaccouning/ 2

5 measures of ICT and non-ict capial services. To allow for complee German growh accouning, he daabase complemens our original capial daa wih German Saisical Office (GSO) daa on labor hours, labor qualiy, and value-added. Preliminary produciviy analysis based on he daabase indicaes a srucural weakness in German ICT invesmen as well as a widespread collapse in TFP growh pos-2000 (see Eicher and Roehn, 2007). A similar produciviy daabase exiss a he Groningen Growh and Developmen Cenre. Differences beween he Ifo Indusry Growh Accouning Daabase and he Groningen Indusry Growh Accouning Daabase are fourfold. Firs, Groningen repors on 26 indusries, while he Ifo Indusry Growh Accouning Daabase conains 52 indusries. Second, he Ifo Indusry Growh Accouning Daabase includes Office Equipmen in ICT asses, since Office Equipmen and Compuers canno be separaed a he German indusrylevel. A hird difference arises in he asse class eniled Buildings and Srucures. The Ifo Indusry Growh Accouning Daabase includes Residenial and Non-Residenial Buildings and Srucures while Groningen includes only Non-Residenial Buildings and Srucures. Finally, and perhaps mos imporanly, since German Sofware invesmens are no repored by he GSO, he Groningen daabase assumes ha a fixed fracion of Inangible Asses is Sofware. Groningen hen generaes German indusry-level Sofware invesmen by using a raio of Sofware o IT-equipmen invesmen ha was obained from an average of French, Duch and US daa. In conras, he Ifo Indusry Growh Accouning Daabase obains daa on Sofware invesmen shares in oal Inangible Asses, and indusry-level Sofware invesmen from an exensive (Ifo inernal) survey based sudy by Herrmann and Mueller (1997) and from exensive indusry level Ifo invesmen surveys in 1995, 1998, 1999, The paper is srucured as followed: Secion 2 gives a brief overview of he underlying growh accouning mehodology in he Ifo Indusry Growh Accouning Daabase. Secion 3 deails he exac composiion of he daa in he Daabase. I describes he mehodology used o obain he inpu esimaes and provides exensive informaion on all sources. Specifically, Secion 3.1 focuses on he derivaion of he capial inpu and Secion 3.2 on he deails of he labor inpus. Secion 4 presens some resuls, while Secion 5 concludes. 2. Growh Accouning Framework The growh accouning framework allows us o decompose economic growh ino he conribuions from accumulaed inpu facors and he residual: oal facor produciviy (TFP). The residual capures disembodied echnological progress as well as all oher 3

6 produciviy enhancing facors ha are no explicily measured. The framework is used o disenangle he sources of growh ino he growh effecs ha can be aribued o facor accumulaion and o produciviy increases. Prominen applicaions of he growh accouning framework are he produciviy slowdown beginning in he early sevenies (e.g. Jorgenson and Yip, 2001), he examinaion of he growh miracle of he Eas Asian counries (e.g. World Bank, 1993) and analyses of he informaion and communicaion echnology (ICT) revoluion (e.g. Jorgenson and Siroh, 2000, and Oliner and Sichel, 2000). The breakdown of secoral oupu growh ino inpu facors, capial and labor, especially ino ICT and non-ict capial allows us o deermine he underlying sources of aggregae oupu growh as well as of gains in produciviy in imes of rapid echnological progress. In his secion we inroduce he growh accouning mehodology and he daa requiremens o apply hese echniques. The following chapers deail he sources and preliminary resuls of he Ifo Indusry Growh Accouning Daabase. The growh accouning framework employed in he Ifo Indusry Growh Accouning Daabase is based on Jorgenson and Griliches (1967) and Jorgenson, Gollop and Fraumeni (1987). The daabase provides all daa necessary for German indusry level growh accouning exercises, ha is, i includes daa on oupu and inpu facors as well as daa on all inpu shares. Deailed invesmen daa is available on he indusry-asse level, which allows us o dissec aggregae equipmen asses ino secoral ICT and non-ict asses. The daabase repors oal facor produciviy as well as labor produciviy, and we focus on value-added as he relevan measure of indusry oupu. The daabase does no repor gross oupu since we lack appropriae deflaors for inermediae inpus a he indusry level. Jorgenson, Ho and Siroh (2005) demonsrae ha value-added TFP measures can be convered ino gross oupu TFP measures using he share of nominal value added in nominal gross oupu. Decomposing indusry-level value-added growh ino is inpu facors and TFP conribuions requires deailed informaion on capial services and qualiy adjused labor. Jorgenson, Ho and Siroh (2005) commence wih ln VA = K, ln K + υ L, ln L + lntfpi, υ (1) where K i, and L i, denoe capial services and qualiy adjused labor of indusry i and period, respecively. When informaion on value-added, capial services and labor qualiy is a hand, oal facor produciviy growh, lntfp i,, can be derived as he residual. The wo-period 4

7 average nominal inpu shares of capial and labor are υ K, and υ L,, respecively. They are given by ( υ + υ ) υ, wih h= K, L. (2) h, = 0. 5 h, h, 1 Where he inpu shares υ are defined as h, PK, K υ K, =, (3) P VA VA, P L L, υ L, =, (4) PVA, VAi, and P K, i,, P L i,, and P VA, i, are he prices of capial, labor, and value-added, respecively. From he sandard growh accouning assumpion of consan reurns o scale i follows ha υ υ K, + L, = 1. We can now rewrie equaion (1) o derive average labor produciviy (ALP) growh, defined as value-added per hour worked ln ALP = K, ln k + υ L, ln q + lntfpi, υ (5) where ln q i, represens labor qualiy growh and ln k i, reflecs capial deepening. Equaion (5) relaes labor produciviy growh o changes in capial deepening (when workers are mached wih more and beer capial), labor qualiy, and oal facor produciviy growh. TFP is ofen hough o capure echnology, bu i also reflecs omied variables, deviaions from he assumpion of consan reurns o scale, marke srucure, and measuremen errors. 3. Daa and Mehods Equaion (1) shows how he growh rae of value-added can be decomposed ino he weighed growh raes of he inpu facors capial and labor and a residual (TFP). In his secion we discuss how each of he ingrediens of equaion (1) can be esimaed and provide he respecive daa sources. Value-added is direcly aken from he GSO and we herefore focus our exposiion on capial and labor inpu measures. The mehodology is well esablished and a summary is provided in Jorgenson, Ho and Siroh (2005) and recen applicaions can be found in Bureau of Labor Saisics (2000b). For an overview, Table 6 liss he sources of each variable employed in he Ifo Indusry Growh Accouning Daabase. 3.1 Capial Inpus: Capial Services and Capial Socks Esimaing Capial Services 5

8 Capial services, in conras o capial socks, are he flows of services by which each capial asse ype conribues o he producion process. I is he preferred capial measure in produciviy analyses. Following Jorgenson, Ho and Siroh (2005, p. 154) we assume capial services for an individual asse ype o be proporional o he capial sock, ( S + S ) 1 = (6). 2 K QK, j 1 Here he capial service flows of asse j are he average of he curren and pas curren value of capial sock S i j,, (measured a he end of a period). The assumed proporionaliy beween capial socks and capial services implies ha growh raes of socks and services for each asse are idenical. The disincion beween capial socks and services, however, becomes crucial when aggregaing over differen ypes of asses. To consruc an aggregae index of capial services, we assume wih Jorgenson, Ho and Siroh (2005, pp ) ha each asse is weighed by is marginal produciviy. Under he assumpion of compeiive markes he marginal produciviy can be measured as he price of capial services P K i, j,,, which as we show below is equal o he user cos of capial. An overall index of capial services can hen be consruced as: ln K, = µ, ln K,, (7) i j i j i j where µ.5( µ + ), and i, j = 0 µ 1 PK, K µ =. Equaions (6) and (7) highligh P K j K, he need for wo imporan measures o derive capial service esimaes on he indusry level: capial socks S i j,, and he user coss of capial P K, i, j, for each capial ype. The res of his secion focuses on how capial socks and user cos of capial are consruced in he Ifo Indusry Growh Accouning Daabase Esimaing Capial Socks The Perpeual Invenory Mehod We use he perpeual invenory mehod (PIM) o derive our capial sock measures. According o he PIM, he sock of capial of asse j in indusry i a he end of period, according o: τ ( δ j ) + I = (1 δ j I j τ S = S 1 ), τ = 0 S i j,,, evolves 1 (8) 6

9 where I i, is invesmen in asse j in indusry i a consan prices, and δ j is he geomeric depreciaion rae of asse j in indusry i. Equaion (8) simply saes ha he capial sock a he end of he period is he weighed sum of pas invesmens where he weighs reflec efficiency and reiremen losses of older vinages of invesmen. The weighs are he geomeric depreciaion raes. Depreciaion raes are based on he age-efficiency profiles or age-price profiles of invesmen goods. The wo ime profiles are usually no idenical, bu hey are relaed. While he age-efficiency profile is relaed o economic decay ha affecs he producive capaciies of invesmens, he age-price profile refers o depreciaion in erms of loss in value. The crucial poin lies in how he paerns of decay and depreciaion evolve over ime wih respec of each oher. Hulen and Wykoff (1981a, 1981b, 1981c) and Fraumeni (1997) idenified ha he geomeric paern is he bes descripion of economic depreciaion. Anoher advanage of geomeric depreciaion raes over oher forms of depreciaion paerns is ha he age-price profile and age-efficiency profile coincide Transforming Invesmen Series ino Capial Socks Equaion (8) saes ha he generaion of capial socks based on he PIM requires long invesmen series in consan prices for each asse on he indusry level. How far hese invesmen series have o dae back depends on he service life of an asse. For insance, Srucures and Buildings require very long invesmen series due o heir service lives of several decades. The GSO provides invesmen series for all 12 asse ypes for Unified Germany ( ) a he aggregae level. The GSO furher provides indusry-level invesmens for wo asse ypes only, namely New Equipmen and Oher Asses and Srucures and Buildings. To obain indusry level invesmens for all 12 asse ypes in consan 2000 euro prices, we uilize he Ifo Invesorenrechnung. The Ifo Invesorenrechnung breaks down he 12 asse ypes ino 100 deailed subasses, for which invesmen daa is colleced (for a deailed lis of he subdivision of he 12 asse ypes ino he 100 subasses, see Table A.1 in he Appendix). The advanage of he deep pariion ino 100 subasses is ha i simplifies he idenificaion of purchasing indusries. Addiionally, he Ifo Invesorenrechnung obains informaion abou he recipien indusries direcly from indusry organizaions or from specific Ifo Invesmen Survey quesions. 3 These pieces of informaion are hen combined ino an invesmen flow 2 For he relaionship beween an age-efficiency and an age-price profile in case of geomeric raes see Jorgenson, Ho and Siroh (2005), p. 153, and OECD (2001a), p The Ifo Invesmen Survey follows he EU guidelines for harmonized business surveys and conains 70,000 German firms, 5000 of which are surveyed for each sample period. I is esablished as an excellen leading indicaor of German invesmen; i is also incorporaed in a number of oher leading indicaors, mos prominenly he European Commission s Economic Indicaors of he Euro Zone. 7

10 marix (Abnehmer-Basismarix) ha links he 100 invesmen asses o he 52 indusries. Based on he invesmen flow marix he Ifo Invesorenrechnung hen produces indusry invesmens ha are compaible wih aggregae GSO invesmen levels by asse ypes and by indusries. For a deailed lis of he asses and indusries pos-1991, see Table 1. A deailed descripion of he derivaion and sources of invesmens provided by he Ifo Invesorenrechnung can be found in he Appendix. The Ifo Invesorenrechnung does no provide specific informaion on Sofware invesmen. Sofware is included in he broader group of Inangible Asses. However, he allocaion of Inangible Asses o he indusries is derived from an Ifo sudy ha esimaed he indusry invesmen shares in oal Sofware invesmen based on survey quesions abou indusry invesmen in purchased and own accoun Sofware in 1995 (see Hermann and Mueller, 1997). The Hermann and Mueller survey quesions were again asked in 1998, 1999 and 2000 as par of he Ifo Invesmen Survey. The resuls of he surveys were used o furher refine he indusry invesmen shares and were incorporaed ino he user srucure of he invesmen flow marix. Herrmann and Mueller (1997) esimaed ha abou 75% of aggregae invesmen in Inangible Asses is Sofware invesmen. The Ifo Invesorenrechnung holds ha his percenage remained sable in subsequen surveys. To differeniae indusry-level Sofware invesmen from invesmen in Inangible Asses, we herefore assume ha 75% of indusry invesmen in Inangible Asses is Sofware. Esablishing consisen invesmen series prior o 1991 is subjec o hree major challenges. Firs, he Ifo Invesorenrechnung and he GSO, provide only invesmen series for Wes Germany prior o Second, he indusry classificaion changed o NACE pos Pre-1991 he Ifo Invesorenrechnung uses he older GSL WZ79 classificaion. Third, he asse classificaion has changed; pre-1991 he Ifo Invesorenrechnung provides invesmens for 13 asses ypes ha coincide only roughly wih he 12 asses pos For a deailed lis of he pre- and pos-1991 indusry and asse classificaion schemes, see Tables 2 and 3. To overcome hese difficulies he basis for capial services in he Ifo Indusry Growh Accouning Daabase is esimaed as iniial capial socks for To calculae he iniial capial socks in 1991 we uilized wo sources of informaion. Firs, he GSO provides ne capial sock esimaes on he 52-indusry level for Unified Germany in However, hese ne capial socks are only disaggregaed ino wo broad asse ypes: Equipmen and Oher Asses and Srucures and Buildings. To furher disaggregae indusry Equipmen and Oher Asses ne capial socks ino our more deailed asse ypes we used informaion of he Ifo 8

11 Asse Daabase. Based on he Ifo Invesorenrechnung he Ifo Asse Daabase calculaed ne capial socks for 13 asses ypes on he indusry level for Wes Germany ( ) according o he WZ79 indusry classificaion scheme (for deails see Gersenberger e al., 1989). To develop a comparable se of pre- and pos-1991 indusries, we use he GSO (1993) correspondence. The resul is a se of 28 conforming indusries; Table 4 displays he conversion key. This allowed us o conver indusry asses by WZ79 indusry classificaion o indusry asses by he NACE classificaion. Nex we conver pre-1991 asses ino he new asses pos-1991 classificaion (see Table 5). We use unpublished Communicaion Equipmen invesmen series ( ) provided by he Ifo Invesorenrechnung o disaggregae Communicaion Equipmen ou of he broader group of Elecrical Equipmen invesmen. Informaion on Inangible Asses is no available prior o 1991, bu he aggregae ne capial sock for 1991 is provided by he GSO. The disribuion of he aggregae capial sock ino indusries is based on he indusry invesmen shares in 1991 as repored in he Ifo Invesorenrechnung. The procedure resuls in ne capial socks for 28 indusry groups by new asse ypes. To disribue he capial socks by asse o each of he sub-indusries o esablish a 52 indusry daabase we use invesmen shares by asse in The asse capial socks are hen proporionally scaled so ha he sum over all asses equals he GSO s Equipmen and Oher Asses ne capial sock for each of he 52 indusries. Finally, he capial socks were deflaed using he invesmen deflaors deailed in he nex secion. Since our mehod of esablishing he iniial capial sock levels differ from he consrucion of capial sock series in Groningen s Indusry Growh Accouning Daabase 4, we compare our iniial capial esimaes of he Ifo Indusry Growh Accouning Daabase wih Groningen s capial socks in To be able o make comparisons, we firs aggregae our 52 indusries o mach Groningen s 26 indusries. Furher, we aggregae our 12 capial asse ypes ino wo broad capial ypes: ICT capial and non-ict capial. Figures 1 and 2 depic he high correlaions of ICT and non-ict iniial capial sock levels beween he Ifo Indusry Growh Accouning Daabase and Groningen s capial sock levels in The correlaion coefficien of he ICT and non-ict capial sock levels are 0.97 and 0.95, respecively. This 4 Groningen Growh and Developmen Cenre, Indusry Growh Accouning Daabase, Sepember 2006, online a hp://www.ggdc.ne/, updaed from O'Mahony and van Ark (2003). 5 We hank Rober Inklaar for making he unpublished capial sock levels of he Groningen s Indusry Growh Accouning Daabase available o us. 9

12 implies ha he consrucion of he iniial capial sock canno be he source of any poenially subsanial differences in he subsequen growh raes Deflaion of Invesmen Invesmen deflaors ransform recen vinages of invesmens ino equivalen efficiency unis of earlier vinages. The key feaure of invesmen price indices ha are based on consanqualiy unis is ha hey accoun for price declines in goods ha are characerized by fas echnological progress. Compuers, for insance, are such goods because heir increased processing speed and sorage capaciy enhances heir qualiy remendously. Using he concep of comparable prices, he acual price of compuers has coninuously declined. No accouning for such qualiy improvemens oversaes acual prices and resuls in lower real-erm growh raes of compuer invesmens. To overcome his measuremen problem, hedonic regression approaches were applied for compuers. This mehodology was inroduced by Cole e al. (1986) and developed furher by he US Bureau of Economic Analysis and he US Bureau of Labor Saisics o capure price developmens in he presence of rapidly increasing echnological progress. The Ifo Invesorenrechnung provides price indices for each asse a he indusry level. These price indices mach he aggregae deflaor of he GSO for each asse, for deails see Gersenberger e al. (1989): GSO Ifo P I Pi, I i = (9). For non-ict asses (numbered asses j = 1, 2, 4, 6, 7, 8, 9, 10, 12 in Table 1) he Ifo Indusry Growh Accouning Daabase employs he asse and indusry specific deflaors of he Ifo Invesorenrechnung. To deflae ICT asses ino consan-qualiy unis, he Ifo Indusry Growh Accouning Daabase employs he aggregae ICT-deflaors for he asses Compuer and Office Equipmen, Communicaion Equipmen and Sofware developed by Timmer, Ypma and van Ark (2003). These deflaors follow he harmonizaion -mehod pioneered in Schreyer (2000, 2002). According o his mehod, price indices are based on US hedonic price indices adjused for differences in general inflaion levels beween Germany and he Unied Saes. Thus, we rescale he Ifo indusry-specific deflaors o mach he aggregae deflaor of Timmer, Ypma and van Ark (2003) for all ICT-asses (j = 3, 5, 11): Groningen Ifo adjused P I P I i =, where Ifo adjused Ifo Groningen GSO P = Pi, Pj, Pj, (10). 10

13 This mehod preserves he indusry price differences and a he same ime assures ha he deflaors reflec an inernaionally comparable decline in ICT-asse prices over ime. Sources for Groningen ICT deflaors and non-ict deflaors are lised in Table Depreciaion Raes Geomeric depreciaion raes are he final ingredien necessary for he calculaion of PIM capial socks. Fraumeni (1997) derived he geomeric depreciaion raes, δ j, as a funcion of he declining-balance rae, R j, and he asse s average service life, T j (indusry dimension suppressed): R j δ j = (11) T j For deails on he sources of used depreciaion raes and inpu facors used o calculae depreciaion raes see Table 6. For a complee lis of he geomeric depreciaion raes applied see Table 7. We employed Ifo specific German daa on average service lives on indusryasses and combined hem wih he declining balance rae esimaes for hese asses from he US Bureau of Economic Analysis (BEA) as deailed in Fraumeni (1997). According o he BEA, he declining balance raes are se o 1.65 for he equipmen asses and 0.91 for Srucures and Buildings. The underlying source of Ifo specific average service lives is an Ifo sudy conduced by Gersenberger e al. (1989). The auhors use primarily ax-lives o derive average values for economic service lives, which generally represen he minimum of he acual economic service lives. While economic service lives change over ime, daa on such changes does no exis. A ime-dependen adjusmen of service lives is no always feasible, herefore i is common in he lieraure o assume a reducion of he economic service lives of 25 percen, on average, over he period 1950 o 1986 (see Gersenberger e al. 1989, pp ). To assure ha our indusry-specific service lives are in line wih GSO asse-specific average service lives, he indusry-specific service lives are scaled so ha he indusry average for each asse maches he average service lives for each asse of he GSO as repored in UNECE (2004). For ICT asses we use separae depreciaion raes o generae daa ha is inernaionally comparable. For Communicaion Equipmen and Sofware, we uilize he geomeric depreciaion raes calculaed by Jorgenson and Siroh (2000). For Compuers and Office Equipmen we use geomeric depreciaion raes from Van Ark e al. (2002). For Office Equipmen he depreciaion raes change over ime. This reflecs he fac ha his asse caegory is comprised of asse ypes wih very differen depreciaion raes. For example, 11

14 compuers have considerably shorer service lives han phoocopiers. The varying depreciaion raes, herefore, accoun for he fac ha he composiion of his asse caegory has changed over ime, largely in he direcion of a higher share of faser depreciaing compuers. Geomeric depreciaion raes for Auomobiles are also aken from Jorgenson and Siroh (2000) User Cos of Capial Capial displays differen produciviies in differen asse classes, which is refleced in is price. In general he price of capial services is capured by he renal price of capial ha reflecs he marginal produciviy of he invesed capial. Consider a firm s invesmen decision, choosing beween buying an asse or any oher invesmen opporuniy. In equilibrium a firm mus be jus indifferen beween he wo alernaives: invesing he money (P I, ) o earn a nominal rae of reurn, or buying capial wih he same amoun of dollars, collecing a price of capial (renal price or user cos of capial) and hen selling he depreciaed asse a nex period s price (P I,+1 ). This implies he following invesmen arbirage equaion (Jorgenson, Ho and Siroh, 2005, p. 154): ( ) PI, = PK, ( 1 j ) PI, + 1 i δ (12) where nominal ineres, i +1, earned on he acquisiion price in period, P I,,, mus equal he depreciaed acquisiion price in period +1 plus he price of capial, P K,+1. Rearranging (12) yields he familiar price of capial equaion: P ( i ) PI, δ j PI, 1 K, + 1 = + + π (13), where π + 1 is he percen change in he acquisiion price of an invesmen good beween period and +1. The nominal ineres rae, i +1, is he long-erm ineres rae for Germany derived from he OECD Economic Oulook Daabase (for sources see Table 6). Equaion (13) simply saes ha he price of capial services in period +1 mus equal he real ineres, ( ) i π paid on he acquisiion price of capial in period plus he depreciaion on he acquisiion price of capial in period Labor Inpu Labor inpu daa is provided for compleeness in he Ifo Indusry Growh Accouning Daabase. Much of his daa is no new and can be obained from he appropriae sources. A imes we need o adjus he daa o achieve he appropriae level of disaggregaion. However, he novely of he daabase lies in is invesmen and capial sock daa. 12

15 3.2.1 Qualiy Adjused Labor An hour of supplied labor can exhibi very differen marginal produciviies, depending for insance on he level of educaion, experience or gender of he employee. Similarly o capial services, his difference mus be refleced when aggregaing differen kinds of labor ino an overall measure of labor inpu. Jorgenson, Ho and Siroh (2005) sugges as he appropriae labor inpu measure ln L = ω l ln H l, (14) l where ω. ( ω + ω ) l = 0 5 l, l, 1, and ω l, = l P L, l, P H L, l, l, H l,. The hours of ype l skills in indusry i a ime are given by H i l,,, and he price (wage rae) of an hour of ype l in indusry i a ime is given by P L, i, l,. as: Equivalenly, Jorgenson e al. (2005) show ha labor inpu growh can also be wrien L ln L = ln Q + ln H (15) where L lnq i, represens he growh rae of labor qualiy given by ln, ω ln ln and H = H l,. (16) L Q i = l H l, H l Equaion (16) expresses labor qualiy growh as he difference beween weighed and unweighed growh raes of hours worked. l Our measure of indusry labor qualiy growh L ln Q i, is obained from he Groningen Indusry Level Growh Accouning Daabase as deailed in Inklaar, O Mahony and Timmer (2005). However, Groningen s labor qualiy esimaes are available for 26 broad indusries only. To obain labor qualiy growh for our 52 indusries, we assumed ha labor qualiy growh was he same among all sub-indusries wihin a broad Groningen indusry and equal o he broad indusry growh rae. Inklaar e al. (2005) provide labor qualiy only unil We use daa o exrapolae labor qualiy o 2003 using an AR process wih opimal lag lengh (using he AIC, Final Predicion Error, Hannan-Quinn, and he Schwarz crierion (BIC)) for each indusry o mach he pos-2000 aggregae labor qualiy growh provided by Schwerd and Turunen (2006). 13

16 Labor hours are obained from he GSO. A problem emerges due o he fac ha hours worked are available for 14 secors only. Here we assume ha hours worked per employee (including self-employed) in he 14 secors resembles hose of he respecive disaggregaed Ifo Indusry Growh Accouning Daabase indusries. Specifically, we compue he hours worked per employee for each of he 14 indusries and muliply hem by he numbers of employees in he respecive disaggregaed Ifo Indusry Growh Accouning Daabase indusries o obain oal hours worked for each of he 52 indusries. For deails on he sources of all labor inpu daa, see Table The Labor Compensaion Share As expressed in equaion (1), he growh rae of labor inpus is weighed by he labor compensaion share in oal indusry value-added. Labor compensaion for employed workers is provided by he GSO (see Table 6 for deailed source). However, he GSO publishes no daa on he compensaion of self-employed workers. To adjus for self-employed workers in our measure of labor compensaion, we apply he simples assumpion ha compensaion per self-employed is equal o he compensaion of employed workers. 4. Applicaions For a full overview of he applicaions ha can be generaed by he daabase we ask he reader o consul he voluminous lieraure on produciviy sudies summarized by Jorgenson e al. (2005). Iniial work by Eicher and Roehn (2007) dissecs German produciviy growh on he basis of he daabase o highligh he specific indusry conribuions o German TFP growh. Figures 3a) c), for example, plo he modified Harberger (1998) diagram for he individual indusry TFP growh conribuions for he hree periods , and The verical axis displays he cumulaive indusry conribuions o aggregae TFP growh, while he horizonal axis plos he cumulaive indusry oupu share in oal value added (Domar-weighs, Domar, 1961). Indusry nominal gross oupu daa are direcly aken from he GSO. The verical disance beween wo poins displays he TFP conribuion of an individual indusry. Focusing firs on he average TFP growh a he aggregae level across he hree periods (displayed by he horizonal line), we find ha aggregae TFP growh increased from 0.35% in o 0.47% in However, pos-2000 oal facor produciviy growh collapsed o abou 0% in Germany. Wha is sriking, however, is he heerogeneiy of TFP growh conribuions a he disaggregaed indusry level oulined by Figures 3a)-c). The curves are surprisingly seep, indicaing a bifurcaed economy wih eiher srong produciviy gains or sharp produciviy losses. Even more imporan is ha he share of indusries ha 14

17 conribue negaively is increasing dramaically over he hree ime periods. This is especially apparen if we compare he and periods in Figures 3 b), c). In , 17 indusries experienced negaive TFP growh raes, feauring large conracions in Oher Business Services, Moor Vehicles and he Insurance indusry. In , in conras, 28 indusries accouning for almos 50 percen of aggregae value added showed negaive TFP growh. Comparing he firs wo periods in Figures 3 a), b), i is sriking ha Wholesale Trade and Financial Inermediaion increased heir TFP conribuions subsanially beween he wo periods. The same is rue for Office Machinery & Compuers and Communicaions. Of hese indusries only Wholesale Trade managed o increase is TFP growh conribuion furher pos-2000 when TFP growh in Communicaion and Office Machinery & Compuer slowed, and Financial Inermediaion TFP urned negaive. Conribuions from he Insurance, Machinery and he Governmen secor seadily declined over he hree periods, poining o severe problems wihin hese indusries. These indusries sared wih posiive TFP growh bu showed negaive TFP growh pos Summary and Conclusion In his paper we have presened a new indusry-asse level daabase ha allows indusry level growh accouning from for 52 indusries and 12 asses. We provide he mehodological underpinnings necessary o produce he capial, labor and produciviy esimaes and presened some firs resuls. The daabase allows for he firs ime he analysis of German produciviy drivers on he 52-indusry level. We provide researchers wih access o his daabase o sudy no only he deerminans of economic growh and per capia income bu also he drivers of he srucural changes in he German economy since 1991 from manufacuring o an ICT-based, New Economy. 15

18 References Bureau of Economic Analysis, Mehodology Papers, The Measuremen of Depreciaion in he NIPA's, July 1997, online a hp://www.bea.gov/bea/aricles/ NATIONAL/NIPAREL/1997/0797fr.pdf [access dae: Ocober 22 nd, 2006]. Bureau of Labor Saisics (2000b), Mulifacor Produciviy Trends, 1998, USDL , Sepember 21. Cole, Rosanne, Y. C. Chen, Joan A. Barquin-Solleman, Ellen R. Dullberger, Nuran Helvacian, and James H. Hodge (1986), Qualiy-Adjused Price Indexes for Compuer Processors and Seleced Peripheral Equipmen, Survey of Curren Business, Volume 66, No. 1 (January), Domar, Evsey (1961), On he Measuremen of Technological Change, Economic Journal 71, No. 284 (December), pp Eicher, Theo S. and Oliver Roehn (2007), Sources of German Produciviy Demise Tracing he Effecs of Indusry Level ICT Invesmen, German Economic Review, forhcoming. Fraumen Barbara M. (1997), The Measuremen of Depreciaion in he U. S. Naional Income and Produc Accouns, online a hp://www.bea.gov/bea/aricles/national/ NIPAREL/1997/0797fr.pdf [access dae: Sepember, 13 h, 2006]. German Saisical Office (2002), Klassifikaion der Wirschafszweige, Ausgabe 2003 (WZ 2003), Wiesbaden, online a hp://www.desais.de/download/d/klassif/wz03.pdf [access dae: Ocober, 20 h, 2006]. Gersenberger, Wolfgang, Johannes Heinze, Marlies Hummel, and Kur Vogler Ludwig (1989), Ifo Sudien zur Srukurforschung 12, Ifo Insiue for Economic Research, Munich, Germany. Harberger, Arnold C. (1998), A Vision of he Growh Process, American Economic Review Volume 88, No. 1, pp Hermann, Michael and Alber Mueller (1997), Ifo Sudien zur Srukurforschung 26, Ifo Insiue for Economic Research, Munich, Germany. Hulen, Charles R., and Frank C. Wykoff (1981a), Economic Depreciaion and he Taxaion of Srucures in Unied Saes Manufacuring Indusries: An Empirical Analysis, In: The Measuremen of Capial, ed. Dan Usher. Hulen, Charles R., and Frank C. Wykoff (1981b), The Esimaion of Economic Depreciaion Using Vinage Asse Prices: An Applicaion of he Box-Cox Power Transformaion, Journal of Economerics, Volume 15, No. 3 (April), pp Hulen, Charles R., and Frank C. Wykoff (1981c), The Measuremen of Economic Depreciaion, In: Depreciaion, Inflaion, and he Taxaion of Income from Capial, ed. Charles R. Hulen, Urban Insiue Press, Washingon D.C. Inklaar, Rober, Mary O Mahony, and Marcel P. Timmer (2005), ICT and Europe s Produciviy Performance: Indusry-level Growh Accoun Comparisons wih he Unied Saes, Review of Income and Wealh, Volume 51, Issue 4, pp Jorgenson, Dale W., and Zvi Griliches (1967), The Explanaion of Produciviy Change, The Review of Economic Sudies, Volume 34, No. 3, pp Jorgenson, Dale W., Frank M. Gollop and Barbara M. Fraumeni (1987), Produciviy and U. S. Economic Growh, Harvard Universiy Press, Cambridge. 16

19 Jorgenson, Dale W., and Kevin J. Siroh (2000), Raising he Speed Limi: US Economic Growh in he Informaion Age, Brookings Papers on Economic Aciviy, Volume 1, pp Jorgenson, Dale W., Mun S. Ho, and Kevin Siroh (2005), Produciviy Informaion Technology and he American Growh Resurgence, Volume 3, MIT Press, Cambridge, Massachuses, Unied Saes. Jorgenson, Dale and Eric Yip (2001), Whaever Happened o Produciviy Growh?, in: E.R. Dean, M.J. Harper and C. Hulon, eds.: New Developmens in Produciviy Analysis, Chicago: Universiy of Chicago Press, pp OECD (2001a), Measuring Produciviy - Measuremen of Aggregae and Indusry-Level Produciviy Growh, online a hp://www.oecd.org/daaoecd/59/29/ pdf [access dae: Ocober, 10 h, 2006]. Oliner, Sephen D. and Daniel E. Sichel (2000), The Resurgence of Growh in he Lae 1990s: Is Informaion Technology he Sory?, Journal of Economic Perspecives, Volume 14, No. 4, Fall, pp Schreyer, Paul (2000), The Conribuion of Informaion and Communicaion Technology o Oupu Growh: A Sudy of he G7 Counries, STI Working Papers, No.2, OECD, Paris. Schreyer, Paul (2002), Compuer Price Indices and Inernaional Growh and Produciviy Comparisons, Review of Economic and Wealh, Volume 48, No. 1, pp Schwerd, Guido and Jarkko Turunen (2006), Growh in Euro Area Labour Qualiy, ECB Working Papers, No Timmer, Marcel, Gerard Ypma and Bar van Ark (2003), ICT in he European Union: Driving Produciviy Divergence?, Groningen Growh and Developmen Cener, Working Paper GD-67. UNECE (2004), Survey of Naional Pracices in Esimaing Service Lives of Capial Asses (ECE Secrearia), Join Meeing on Naional Accouns, 28 h -30 h April 2004, Geneva, online a hp://www.unece.org/sas/documens/ces/ac.68/2004/18.add.2.e.pdf [access dae: Sepember, 15 h, 2006]. Van Ark, Bar, Johanna Melka, Nanno Mulder, Marcel P. Timmer and Gerald Ypma and (2002), ICT Invesmen and Growh Accouns for he European Union, , Groningen Growh and Developmen Cener, Research Memorandum GD-56. World Bank (1993), The Eas Asian Miracle. Economic Growh and Public Policy, Oxford- New York, Oxford Universiy Press. 17

20 Abbreviaions AGAM : Associaion of German Auomobile Manufacurers (Verband der Deuschen Auomobilindusrie, VDA) AGMEM : Associaion of German Machinery and Equipmen Manufacuring (Verband des Deuschen Maschinen- und Anlagenbaus, VDMA) FOA : Federal Office of Auomobiles (Kraffahrbundesam, KBA) GDDC : Groningen Growh and Developmen Cenre GIER : German Insiue for Economic Research (Deusches Insiu für Wirschafsforschung, DIW) AGEEM : Associaion of German Elecrical and Elecronic Manufacures (Zenralverband Elekroechnik und Elekroindusrie, e.v., ZVEI) GSO : German Saisical Office (Deusches Saisisches Bundesam) IS Leasing : Ifo Invesmen Survey Leasing (Ifo Invesiionses Leasing) NA : Naional Accouns provided by GSO (Volkswirschafliche Gesamrechung, VGR des Deuschen Saisischen Bundesames) 18

21 Table 1 Ifo Indusry Growh Accouning Daabase Indusry and Asse Classificaion in accordance wih Naional Accouns (NA) Seq. Nr. Indusry Seq. Nr. Asses 1 Agriculure, Foresry, Fishing 1 Meal Producs 2 Energy Mining and Quarrying 2 Machinery 3 Mining and Quarrying, ex. Energy 3 Compuers and Office Equipmen 4 Food and Tobacco 4 Elecrical Generaion and Disribuion 5 Texiles 5 Communicaion Equipmen 6 Apparel 6 Insrumens, Opics and Waches 7 Leaher 7 Furniure, Music and Spors 8 Wood Producs Equipmen 9 Paper, Pulp 8 Oher Machines and Equipmen. 10 Publishing, Prining 9 Auomobiles 11 Coke, Peroleum, Nuclear Fuels 10 Oher Vehicles 12 Chemicals 11 Inangible Asses 13 Rubber, Plasic Equipmen and Oher Asses 14 Non-Meallic Mineral Producs 12 Srucures and Buildings 15 Basic Meals Asses 16 Fabricaed Meal Producs 17 Machinery 18 Office Machinery and Compuers 19 Elecrical Apparaus n.e.c. 20 Radio, TV and Comm. Equipmen 21 Insrumens, Opics and Waches 22 Moor Vehicles 23 Oher Transpor Equipmen 24 Furniure and Manufacuring n.e.c. 25 Recycling 26 Elecriciy, Gas 27 Waer Supply 28 Consrucion 29 Sale and Repair of Moor Vehicles 30 Wholesale Trade 31 Reail Trade 32 Hoels and Resaurans 33 Land Transpor 34 Waer Transpor 35 Air Transpor 36 Auxiliary Transpor Aciviies 37 Communicaions 38 Financial Inermediaion 39 Insurance 40 Auxiliaries Financial and Insurance Inermediaion 41 Real Esae 42 Renal and Leasing Services 43 Compuer and Relaed Aciviies 44 Research and Developmen 45 Oher Business Services 46 Public Adminisraion, Defense, Social Securiy 47 Educaion 48 Healh and Social Work 49 Sewage and Refuse Disposal 50 Organizaions, n.e.c 51 Recreaional, Culural, Spors Aciviies 52 Oher Services Source: Ifo Indusry Growh Accouning Daabase, Ifo Invesorenrechnung 19

22 Table 2 Asse Type Classificaions Pre- and Pos-1991 Seq. Nr. Pre-1991 Asses Seq. Nr. Pos-1991 Asses 1 Foundry Producs 1 Meal Producs 2 Seel and Railed Vehicles 2 Machinery 3 Machinery 3 Compuers and Office Equipmen 4 Office Equipmen 4 Elecrical Generaion and Disribuion 5 Auomobiles 5 Communicaion Equipmen 6 Oher Vehicles 6 Insrumens, Opics and Waches 7 Elecrical Producs 8 Fine Mechanics 7 Furniure, Music and Spors Equipmen 9 Iron, Plae and Seel Producs (IPS) 8 Oher Machines and Equipmen 10 Musical Insrumens, Toys and Spors Equipmen 9 10 Auomobiles Oher Vehicles 11 Wood Producs 11 Inangible Asses 12 Texiles 13 Srucures (Non Residenial and 12 Srucures (Non Residenial and Residenial) Residenial) Source: Ifo Invesorenrechnung, Gersenberger e al. (1989) 20

23 Table 3 Pre- and Pos-1991 Indusry Classificaion Seq. Nr. Pre-1991 Indusries Seq. Nr. Pos-1991 Indusries 1 Agriculure, Foresry, Fishing 1 Agriculure, Foresry, Fishing 2 Elecriciy 2 Energy Mining and Quarrying 3 Gas 3 Mining and Quarrying, ex. Energy 4 Waer Supply 4 Food and Tobacco 5 Mining 5 Texiles 6 Chemicals 6 Apparel 7 Peroleum 7 Leaher 8 Plasic 8 Wood Producs 9 Rubber 9 Paper, Pulp 10 Quarrying 10 Publishing, Prining 11 Fine Ceramics 11 Coke, Peroleum, Nuclear Fuels 12 Glass 12 Chemicals 13 Iron-Producing Indusries 13 Rubber, Plasic 14 Non-Iron Meal Producs 14 Non-Meallic Mineral Producs 15 Foundry 15 Basic Meals 16 Exrusion, Railed Vehicles 16 Fabricaed Meal Producs 17 Seel-, Ligh Meal-Working, Railed Vehicles 17 Machinery 18 Machinery 18 Office Machinery and Compuers 19 Office Machinery and Compuers 19 Elecrical Apparaus n.e.c. 20 Manufacurer Leasing Office Machinery and Compuers Radio, TV and Comm. Equipmen Insrumens, Opics and Waches 21 Road Vehicle Manufacuring 22 Moor Vehicles 22 Shipbuilding 23 Oher Transpor Equipmen 23 Aerospace Manufacuring 24 Furniure and Manufacuring n.e.c. 24 Elecrical Apparaus n.e.c. 25 Recycling 25 Manufacurer Leasing Elecrical Apparaus n.e.c. 26 Elecriciy, Gas 26 Fine Mechanics, Opics 27 Waer Supply 27 Iron, Plae and Meal Manufacuring 28 Consrucion 28 Music Insrumens., Toys, Spors Equipmen 29 Sale and Repair of Moor Vehicles 29 Wood Working 30 Wholesale Trade 30 Wood Producs 31 Reail Trade 31 Paper, Pulp 32 Hoels and Resaurans 32 Paper, Pulp Producs 33 Land Transpor 33 Publishing, Prining 34 Waer Transpor 34 Leaher 35 Air Transpor 35 Texiles 36 Auxiliary Transpor Aciviies 36 Apparel 37 Communicaions 37 Food 38 Financial Inermediaion 38 Consrucion 39 Insurance Wholesale Trade Reail Trade 40 Auxiliaries Financial and Insurance Inermediaion 41 Railways 41 Real Esae 42 Waer Transpor 42 Renal and Leasing Services 43 Oher Transporaion 43 Compuer and Relaed Aciviies 44 German Federal Mail 44 Research and Developmen 45 Financial Inermediaion 45 Oher Business Services Insurance Aparmen Leasing 46 Public Adminisraion, Defense, Social Securiy 48 Hoels and Resaurans 47 Educaion 49 Educaion, Science, Ar, Publicaion 48 Healh and Social Work 50 Healh, Veerinary 49 Sewage and Refuse Disposal 51 Oher Services 50 Organizaions, n.e.c 52 Leasing Companies 51 Recreaional, Culural, Spors Aciviies 53 Commercial Residenial Buildings 52 Oher Services 54 Real Esae Fund, Asse Managemen 55 Local Auhoriies, Social Securiies 56 Privae Organizaion wihou Pecuniary Reward Source: Ifo Invesorenrechnung, Gersenberger e al. (1989) 21

24 Table 4 Indusry Conversion Key: Pre- o Pos-1991 Indusry Classificaion Seq. Nr. Pre-1991 Indusries Seq. Nr. Pos-1991 Indusries 1 Agriculure, Foresry, Fishing 1 Agriculure, Foresry, Fishing Mining Peroleum Quarrying Fine Ceramics Energy Mining and Quarrying Mining and Quarrying, excl. Energy Coke, Peroleum, Nuclear Fuels Non-Meallic Mineral Producs 12 Glass 37 Food 4 Food and Tobacco 35 Texiles 5 Texiles 36 Apparel 6 Apparel 34 Leaher 7 Leaher Music Insrumens, Toys, Spors Equipmen Wood Working Wood Producs Wood Producs Furniure and Manufacuring n.e.c. Paper, Pulp 9 Paper, Pulp Paper, Pulp Producs 33 Publishing, Prining 10 Publishing, Prining 6 Chemicals 12 Chemicals 9 Plasic 13 Rubber, Plasic 8 Rubber Iron-Producing Indusries Non-Iron Meal Producs Foundry Exrusion 15 Basic Meals 17 Seel-, Ligh Meal-Working, Railed Vehicles 16 Fabricaed Meal Producs 27 Iron, Plae and Meal Manufacuring 18 Machinery 17 Machinery 19 Office Machinery and Compuers 18 Office Machinery and Compuers Elecrical Apparaus n.e.c. Fine Mechanics, Opics Elecrical Apparaus n.e.c. Radio, TV and Comm. Equipmen Insrumens, Opics and Waches 21 Road Vehicle Manufacuring 22 Moor Vehicles Shipbuilding Aerospace Manufacuring 23 Oher Transpor Equipmen Wholesale Trade Reail Trade Recycling Sale and Repair of Moor Vehicles Wholesale Trade Reail Trade 2 Elecriciy 26 Elecriciy, Gas 3 Gas 4 Waer Supply 27 Waer Supply 38 Consrucion 28 Consrucion 48 Hoels and Resaurans 32 Hoels and Resaurans 41 Railways 33 Land Transpor 43 Oher Transporaion 35 Air Transpor 36 Auxiliary Transpor Aciviies 42 Waer Transpor 34 Waer Transpor 44 German Federal Mail 37 Communicaions Financial Inermediaion Insurance Aparmen Leasing Commercial Residenial Buildings 20 Manufacurer Leasing Office Machinery and Compuers 25 Manufacurer Leasing Elecrical Apparaus n.e.c. 52 Leasing Companies 51 Oher Services 54 Real Esae Fund, Asse Managemen Financial Inermediaion Insurance Auxiliaries Financial and Insurance Inermediaion 41 Real Esae 42 Renal and Leasing Services Educaion, Science, Ar, Publicaion Healh, Veerinary Local Auhoriies, Social Securiies Privae Organizaion wihou Pecuniary Reward Source: based on German Saisical Office (2002) Compuer and Relaed Aciviies Oher Business Services Oher Services Research and Developmen Educaion Recreaional, Culural, Spors Aciviies Public Adminisraion, Defense, Social Securiy Healh and Social Work Sewage and Refuse Disposal Organizaions, n.e.c

25 Table 5 Asse Conversion Key: Pre- o Pos-1991 Asse Type Classificaion Pre-1991 Asses Pos-1991 Asses Noes Foundry Producs; Seel and Railed Vehicles; Iron, Plae and Seel Producs (IPS) Machinery Office Equipmen Elecrical Producs; Fine Mechanics Musical Insrumens, Toys and Spors Equipmen; Wood Producs; Texiles Auomobiles Oher Vehicles Srucures (Non Residenial and Residenial) Meal Producs Machinery Office Equipmen Elecrical Generaion and Disribuion; Communicaion Equipmen; Insrumens, Opics and Waches Furniure, Music and Spors Equipmen Auomobiles Oher Vehicles Srucures (Non-Residenial and Residenial) --- Oher Machines and Equipmen --- Sofware 1) Meal producs sum of Foundry Producs, Seel and Railed Vehicles, Iron, Plae and Seel Producs (IPS) 2) For ranspor services: Meal Producs only sum of Foundry and IPS, capial socks in Seel are railed vehicles and hus allocaed o Oher Vehicles. 1) Communicaion Equipmen capial sock broken ou of Elecrical Producs based on 11-year-average ( ) invesmen share in Elecrical Producs. 2) Sum of Elecrical Producs (excluding Communicaion) and Fine Mechanics spli up ino Elecrical Generaion and Disribuion and ino Insrumens, Opics and Waches according o 1991 invesmen share. Furniure, Music and Spors Equipmen sum of Musical Insrumens, Toys and Spors Equipmen, Wood Producs, Texiles. 1% of every equipmen asse (excluding Auomobiles and Oher Vehicles) is allocaed owards he new asse Oher Machines and Equipmen. Aggregae Inangible Asses ne capial sock provided by GSO. Indusry allocaion according o invesmen shares in Sofware is 75% of Inangible Asses. Source: Ifo Invesorenrechnung, Gersenberger e al. (1989), Hermann and Müller (1997), and unpublished informaion from he GSO. 23

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