Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited
AbstractAccording 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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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 53 (2001)
Issue (Month): 4 (October)
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- Nicholas Oulton, 2000. "Must the growth rate decline? Baumol's unbalanced growth revisited," Bank of England working papers, Bank of England 107, Bank of England.
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