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How Much Can Engel's Law and Baumol's Disease Explain the Rise of Service Employment in the United States?

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  • Iscan Talan

    ()
    (Dalhousie University)

Abstract

High income elasticity of demand for services and low income elasticity of demand for food (Engel's law), and relatively slow productivity growth in the service sectors (Baumol's disease) have been viewed as key drivers of rising share of services in employment in the United States during the 20th century. How much of the rising share of services can be explained by these two forces? A calibrated model of structural change shows that jointly Engel's law and Baumol's disease could explain about two-thirds of the reallocation of labor into services.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 10 (2010)
Issue (Month): 1 (September)
Pages: 1-43

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Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:26

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Cited by:
  1. Casper Ewijk & Maikel Volkerink, 2012. "Will Ageing Lead to a Higher Real Exchange Rate for the Netherlands?," De Economist, Springer, vol. 160(1), pages 59-80, March.
  2. Murat Ungor, 2011. "De-industrialization of the Riches and the Rise of China," 2011 Meeting Papers 740, Society for Economic Dynamics.
  3. Chris Papageorgiou & Fidel Pérez Sebastián & María Dolores Guilló Fuentes, 2010. "A unified theory of structural change," Working Papers. Serie AD 2010-34, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. Fernando Alexandre & Pedro Bação, 2012. "Portugal Before and After the European Union: Facts on Nontradables," GEMF Working Papers 2013-02, GEMF - Faculdade de Economia, Universidade de Coimbra.
  5. Hiroaki Sasaki, 2010. "Endogenous Phase Switch in Baumol’s Service Paradox Model," Discussion papers e-10-010, Graduate School of Economics Project Center, Kyoto University.
  6. HORI Takeo & UCHINO Taisuke, 2013. "Competition, Productivity Growth, and Structural Change," Discussion papers 13041, Research Institute of Economy, Trade and Industry (RIETI).
  7. Sasaki, Hiroaki, 2012. "Endogenous phase switch in Baumol's service paradox model," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 25-35.

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