Swiss Productivity Monitor

The EU Commission published the 2025 Annual Single Market and Competitiveness Report. Interesting analyses and mostly valuable policy initiatives:

„The competitiveness of the EU economy faces mounting pressure from several angles. It suffers from structurally high energy and electricityprices. The latter are currently 2-3 times higher than in the US. Europeancompanies face challenges on their investment journeys with difficulties in commercialising their research results, hindered by insufficient public and private investments into the most promising technologies and sectors.“

„The Annual Single Market and Competitiveness Report provides the analytical context for the Competitiveness Compass, presented at the same time as the first major initiative of the new Commission.“

Annual Single Market and Competitiveness Report

Competitiveness Compass

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Super interesting!

„Capital (Mis)allocation, Incentives and Productivity“ by Jan Schymik, Matthias Meier, Alexander Schramm, and Alexander Schwemmer.

„This paper studies how managerial pay shapes the allocation of capital within firms. We leverage quasi-experimental variation in the composition of managerial pay between cash bonuses and equity compensation. We find that are lative increase in cash bonuses leads firms to reallocate capital toward less durable investment projects.“

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Good article in The Economist with some optimistic elements for the German economy:

Can Germany’s economy stage an unexpected recovery?

The situation is dire, but there are glimmers of hope

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European clean tech tracker: This tracker provides an overview of the main innovation, manufacturing, and deployment trends in clean tech in Europe.

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Some comments by Martin Vechev (Professor of Computer Science at ETH Zurich) on DeepSeek:

Marcel Salathé (Professor EPFL Lausanne) also made valuable comments on his blog.

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Thought-provoking!

„Home Sweet Home: How Much Do Employees Value Remote Work?“ by Zoe B. Cullen, Bobak Pakzad-Hurson, and Ricardo Perez-Truglia.

„We estimate the value employees place on remote work using revealed preferences in a high-stakes, real-world context, focusing on U.S. tech workers. On average, employees are willing to accept a 25% pay cut for partly or fully remote roles.“

„Because of the strong preference for remote work, we expected to find a compensating wage differential, with remote positions offering lowercompensation than otherwise identical in-person positions. However, using novel data on salaries for tech jobs, we reject that hypothesis. We propose potential explanations for this puzzle, including optimization frictions and worker sorting.“

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The International Labour Organization published its flagship report “World Employment and Social OutlookTrends 2025”

Fundamental imbalances persist in the labour market. Economic growth has slowed to 3.2 per cent, thereby constraining the opportunity for meaningful improvements in job creation and working conditions, particularly in low-income countries. Technological advances have lifted productivity growth and living standards less than expected. Despite the efforts made through industrial policies, structural transformation – the shift towards more diversified and productive economies – has stalled and the gains from it are concentrated in select regions.

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The World Bank published its Global Economic Prospects

„Emerging and Developing Economies in the 21st Century„

„Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development.“

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Call for Papers: Special Issue on the Economic Geography of Global Value Chains

«We welcome conceptual, methodological, and empirical contributions that delve into topics such as:

Sub-national impacts of GVCs: innovation, development, and resilience. Responses of GVCs to global shocks and sustainability challenges.
Advanced methodologies and novel data for analyzing GVC complexities.
The role of public policies in shaping GVC adaptation and resilience.»

Extended Abstract Submission (3,000 words): February 14, 2025

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Special Issue for the Economics of Innovation and New Technology journal on “innovation and strategic autonomy for competitiveness”

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Productivity Bite: Capital Intensity and Factor Productivity as Drivers of Economic Growth

• Investments play an important role in productivity development. A higher capital stock makes labor more productive (provided it can be utilized effectively).
• According to the Long Term Productivity Database, capital intensity – the capital stock per hours worked – is particularly high in Switzerland (Figure 1). In Germany and Austria, capital intensity is also higher than the Eurozone average and the United States. In Germany, Austria, and Switzerland, the importance of industry in total economic value added is comparatively strong. This is likely an important – but probably not the only – reason for the high capital intensity in these three countries.
• Since 2000, the growth of capital intensity in Switzerland and Germany has been relatively weak (Figure 2). While the level remains high in both countries, the gap with other countries has narrowed. The United States has experienced strong growth. It’s noteworthy that the capital stock per working hour in Austria has increased significantly since 2000.
• In Austria, however, the capital stock per working hour is used relatively less productively than in other countries. Total Factor Productivity, which indicates how well high capital intensity is converted into high labor productivity, is significantly lower in Austria than in Switzerland, where Total Factor Productivity is similar to that of the USA (Figure 3). Austria is roughly at the Eurozone average level.
• In the United States, Total Factor Productivity is significantly higher than in the Eurozone. However, there is hardly any difference in capital intensity between the two economic regions.
• Since 2000, Total Factor Productivity growth in Switzerland, Germany, and Austria has been roughly equal (Figure 4). The differences in levels between the three countries have thus not decreased since 2000. The United States has experienced significantly higher growth, while the Eurozone has seen only weak growth.
• Labor productivity, driven by the determinants of capital intensity and total factor productivity, has increased strongly in the United States (Figure 5). Both determinants of labor productivity have increased significantly since 2000.
• In Austria, labor productivity has increased somewhat more than in Switzerland and Germany, but only due to a stronger increase in capital intensity. Austria has not been able to catch up in terms of efficient use of production factors.
• On average, labor productivity in the Eurozone has developed weakly over the past 25 years. This is mainly due to disappointing growth in Total Factor Productivity, while capital intensity has developed solidly. The key for European countries seems to lie in the more efficient use of existing production factors – i.e., Total Factor Productivity. Central reasons for low total factor productivity growth could include high bureaucracy or the hampering of structural change in the economy.
• In Switzerland and Germany, Total Factor Productivity growth was satisfactory and partially compensated for weak growth in capital intensity. However, there is still a gap compared to the United States. Moreover, it is important to increase incentives for private investment in Switzerland and Germany. Stronger growth in capital intensity would be a sign of an attractive and future-oriented location with a dynamic economy.

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5