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Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited

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Oulton, Nicholas

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Abstract

According to Baumol's model of unbalanced growth, if resources are shifting towards industries where productivity is growing relatively slowly, the aggregate productivity growth rate will slow down. This conclusion is often applied to the advanced economies, where resources are indeed shifting towards the relatively stagnant service industries. But Baumol's conclusion only follows logically if the stagnant industries produce final products. If instead they produce intermediate products, the aggregate productivity growth rate may rise rather than fall. This is empirically relevant since the most rapidly expanding service industries, e.g. business services, are producing mainly for intermediate use. Copyright 2001 by Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 53 (2001)
Issue (Month): 4 (October)
Pages: 605-27
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Handle: RePEc:oup:oxecpp:v:53:y:2001:i:4:p:605-27

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References listed on IDEAS
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  1. Ramana Ramaswamy & Bob Rowthorn, 1997. "Deindustrialization: Causes and Implications," IMF Working Papers 97/42, International Monetary Fund.
  2. Robert J. Barro, 1998. "Notes on Growth Accounting," NBER Working Papers 6654, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Oxford University Press, vol. 36(2), pages 175-91, April.
  4. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Blackwell Publishing, vol. 45(3), pages 511-18, October. [Downloadable!] (restricted)
  5. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  6. Griliches, Zvi, 1994. "Productivity, R&D, and the Data Constraint," American Economic Review, American Economic Association, vol. 84(1), pages 1-23, March.
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  7. Baumol, William J & Wolff, Edward N, 1984. "On Interindustry Differences in Absolute Productivity," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1017-34, December. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nicholas Oulton, 2004. "A Statistical Framework for the Analysis of Productivity and Sustainable Development," CEP Discussion Papers dp0629, Centre for Economic Performance, LSE. [Downloadable!]
  2. Nicholas Oulton, . "Productivity versus welfare: or, GDP versus Weitzman's NDP," Bank of England working papers 163, Bank of England. [Downloadable!]
    Other versions:
  3. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2003. "The Case of the Missing Productivity Growth: Or, Does Information Technology Explain why Productivity Accelerated in the US but not the UK?," NBER Working Papers 10010, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Arezki, Rabah & Cherif, Reda & Piotrowski, John, 2009. "Tourism Specialization and Economic Development: Evidence from the UNESCO World Heritage List," MPRA Paper 17132, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. Michael Peneder, 2002. "Industrial Structure and Aggregate Growth," WIFO Working Papers 182, WIFO. [Downloadable!]
    Other versions:
  6. Nicholas Oulton, . "Investment-specific technological change and growth accounting," Bank of England working papers 213, Bank of England. [Downloadable!]
    Other versions:
  7. Jochen Hartwig, 2005. "Sind unsere gesamtwirtschaftlichen Probleme überhaupt lösbar?," KOF Working papers 05-112, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  8. Giulia Felice, 2003. "Dinamica strutturale e occupazione nei servizi," Department of Economics Working Papers 0304, Department of Economics, University of Trento, Italia. [Downloadable!]
  9. Jochen Hartwig, 2008. "Has health capital formation cured ‘Baumol’s Disease’? – Panel Granger causality evidence for OECD countries," KOF Working papers 08-206, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  10. Mika Maliranta & Tuomo Nikulainen, 2008. "Labour Force Paths as Industry Linkages: A Perspective on Clusters and Industry Life Cycles," Discussion Papers 1168, The Research Institute of the Finnish Economy. [Downloadable!]
  11. D'Agostino, Antonello & Serafini, Roberta & Ward, Melanie, 2006. "Sectoral explanations of employment in Europe: the role of services," Research Technical Papers 8/RT/06, Central Bank & Financial Services Authority of Ireland (CBFSAI). [Downloadable!]
  12. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2003. "The case of the missing productivity growth: or, does information technology explain why productivity accelerated in the United States but not the United Kingdom?," Working Paper Series WP-03-08, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
  13. Thomas Moutos & William Scarth, 2002. "Technical Change and Unemployment: Policy Responses and Distributional Considerations," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  14. Hoekman, Bernard & Mattoo, Aaditya, 2008. "Services trade and growth," Policy Research Working Paper Series 4461, The World Bank. [Downloadable!]
  15. Bernard Hoekman, 2008. "The General Agreement on Trade in Services: Doomed to Fail? Does it Matter?," Journal of Industry, Competition and Trade, Springer, vol. 8(3), pages 295-318, December. [Downloadable!] (restricted)
  16. Enrique R. Casares, 2007. "Productivity, Structural Change in Employment and Economic Growth," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 22(2), pages 335-355. [Downloadable!]
  17. Jula, Dorin & Jula, Nicoleta, 2007. "Inter-industries productivity gap and the services employment dynamics," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 4(2), pages 5-15, June. [Downloadable!]
  18. Antonello D’Agostino & Roberta Serafini & Melanie Ward, 2006. "Sectoral Explanations of Employment in Europe: The Role of Services," IZA Discussion Papers 2257, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  19. L. Rachel Ngai & Christopher A. Pissarides, 2005. "Structural Change in a Multi-Sector Model of Growth," IZA Discussion Papers 1800, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  20. Nicholas Oulton & Sylaja Srinivasan, . "Productivity growth in UK industries, 1970-2000: structural change and the role of ICT," Bank of England working papers 259, Bank of England. [Downloadable!]
  21. Gries, Thomas & Naude, Wim, 2008. "Entrepreneurship and Structural Economic Transformation," Working Papers RP2008/62, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  22. Henk L.M. Kox, 2004. "The contribution of business services to aggregate productivity growth," Industrial Organization 0402005, EconWPA. [Downloadable!]
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