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Productivity in the Financial Sector: Brains Are More Important than Computers

DIW Weekly Report 9 / 2009, S. 55-61

Georg Erber, Reinhard Madlener

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A conventional decomposition of the financial sector's gross value added growth into its various components indicates that investments in Information and Communication Technologies are highly important. However, a more comprehensive calculation reveals that growth is the result of - in particular - the increased deployment of medium-skilled labour, without whom the technological potential could not be fully realized. Further, productivity increases in the financial sector are also the result of value chains restructured in favour of external intermediate inputs. Case studies and microeconomic assumptions serve to confirm these relations.

JEL-Classification: C23;E23;O57
Keywords: Financial service industries, Stochastic production possibility frontiers, Efficiency analysis, Growth accounting
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