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Baumol’s cost disease, efficiency, and productivity in the performing arts: an analysis of german public theaters

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  • Anne-Kathrin Last

    ()

  • Heike Wetzel

    ()

Abstract

This paper analyzes the productivity development in the German public theater sector for the seasons 1991/1992-2005/2006. Using a stochastic distance frontier approach that allows to decompose total factor productivity change into different sources we examine (a) whether Baumol’s cost-disease hypothesis is valid in this sector and (b) if so, whether its negative influence on productivity can be compensated by efficiency gains. The findings indicate an increase in real unit labor cost as a result of rising wage rates and, thus, support the cost- disease hypothesis. Furthermore, increasing returns to scale are observed for the majority of the theaters which implies that significant efficiency gains can be realized by the exploitation of scale economies. However, because of the increasing unit labor cost and an increasing scale inefficiency we find an overall decrease in average productivity of about 8 percent within the sample period.

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File URL: http://hdl.handle.net/10.1007/s10824-011-9143-5
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Bibliographic Info

Article provided by Springer in its journal Journal of Cultural Economics.

Volume (Year): 35 (2011)
Issue (Month): 3 (August)
Pages: 185-201

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Handle: RePEc:kap:jculte:v:35:y:2011:i:3:p:185-201

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Web page: http://www.springerlink.com/link.asp?id=100284

Related research

Keywords: Public theaters; Stochastic frontier analysis; Cost disease; Efficiency; Productivity; D24; O12; Z10;

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References

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  1. Roberto Fazioli & Massimo Filippini, 1997. "Cost Structure and Product Mix of Local Public Theatres," Journal of Cultural Economics, Springer, vol. 21(1), pages 77-86, March.
  2. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
  3. Anne-Kathrin Last & Heike Wetzel, 2009. "The Efficiency of German Public Theaters: A Stochastic Frontier Analysis Approach," Working Paper Series in Economics 134, University of Lüneburg, Institute of Economics.
  4. Antonio Estache & Tim Coelli & Sergio Perelman & Lourdes Trujillo, 2003. "A Primer on Efficiency Measurement for Utilities and Transport Regulators," ULB Institutional Repository 2013/44106, ULB -- Universite Libre de Bruxelles.
  5. Mehdi Farsi & Massimo Filippini & William Greene, 2006. "Application Of Panel Data Models In Benchmarking Analysis Of The Electricity Distribution Sector ," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(3), pages 271-290, 09.
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  7. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  8. Grafton, R Quentin & Squires, Dale & Fox, Kevin J, 2000. "Private Property and Economic Efficiency: A Study of a Common-Pool Resource," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 679-713, October.
  9. Mehdi Farsi & Massimo Filippini & William Greene, 2004. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," CEPE Working paper series 04-32, CEPE Center for Energy Policy and Economics, ETH Zurich.
  10. Throsby, David, 1994. "The Production and Consumption of the Arts: A View of Cultural Economics," Journal of Economic Literature, American Economic Association, vol. 32(1), pages 1-29, March.
  11. David Saal & David Parker & Tom Weyman-Jones, 2007. "Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry: 1985–2000," Journal of Productivity Analysis, Springer, vol. 28(1), pages 127-139, October.
  12. Mervi Taalas, 1997. "Generalised Cost Functions for Producers of Performing Arts – Allocative Inefficiencies and Scale Economies in Theatres," Journal of Cultural Economics, Springer, vol. 21(4), pages 335-353, December.
  13. Frey, Bruno S., 1996. "Has Baumol's Cost Disease disappeared in the performing arts?," Ricerche Economiche, Elsevier, vol. 50(2), pages 173-182, June.
  14. Gapinski, James H, 1984. "The Economics of Performing Shakespeare," American Economic Review, American Economic Association, vol. 74(3), pages 458-66, June.
  15. Luis Orea, 2002. "Parametric Decomposition of a Generalized Malmquist Productivity Index," Journal of Productivity Analysis, Springer, vol. 18(1), pages 5-22, July.
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Cited by:
  1. Milton Marquis, 2013. "Bringing Culture to Macroeconomics," Atlantic Economic Journal, International Atlantic Economic Society, vol. 41(3), pages 301-315, September.

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