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Baumol's Diseases: A Macroeconomic Perspective

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  • William D. Nordhaus

Abstract

William Baumol and his co-authors have analyzed the impact of differential productivity growth on the health of different sectors and on the overall economy. They argued that technologically stagnant sectors experience above average cost and price increases, take a rising share of national output, and slow aggregate productivity growth. Using industry data for the period 1948-2001, the present study investigates Baumol%u2019s diseases for the overall economy. It finds that technologically stagnant sectors clearly have rising relative prices and declining relative real outputs. Additionally, technologically progressive sectors tend to have slower hours and employment growth outside of manufacturing. Finally, sectoral shifts have tended to lower overall productivity growth as the share of stagnant sectors has risen over the second half of the twentieth century.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12218.

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Date of creation: May 2006
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Publication status: published as Nordhaus William D, 2008. "Baumol's Diseases: A Macroeconomic Perspective," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-39, February.
Handle: RePEc:nbr:nberwo:12218

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Cited by:
  1. Jianghuai Zheng & Lili Zhang & Yu Wang, 2011. "The underdevelopment of service industry in china: An empirical study of cities in Yangtze River Delta," Frontiers of Economics in China, Springer, vol. 6(3), pages 413-446, September.
  2. Miklós Antal & Jeroen C.J.M. van den Bergh, 2014. "Macroeconomics, Financial Crisis and the Environment. Strategies for a Sustainability Transition," WIFO Working Papers 464, WIFO.
  3. Sasaki, Hiroaki, 2012. "Endogenous phase switch in Baumol's service paradox model," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 25-35.
  4. Dietrich, Andreas & Krüger, Jens, 2010. "Numerical Explorations of the Ngai-Pissarides Model of Growth and Structural Change," Darmstadt Discussion Papers in Economics 46865, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  5. Jorgenson, D.W. & Timmer, Marcel, 2010. "Structural Change in Advanced Nations: A New Set of Stylised Facts," GGDC Research Memorandum GD-115, Groningen Growth and Development Centre, University of Groningen.
  6. Robert Z. Lawrence & Lawrence Edwards, 2013. "US Employment Deindustrialization: Insights from History and the International Experience," Policy Briefs PB13-27, Peterson Institute for International Economics.
  7. Zheng, Jianghuai & Zhang, Lili & Wang, Yu, 2010. "The underdevelopment of service industry in China: an empirical study of cities in Yangtze River Delta," MPRA Paper 33125, University Library of Munich, Germany, revised Jun 2011.
  8. Torben Andersen, 2007. "The Scandinavian Model – Prospects and Challenges," CESifo Working Paper Series 1903, CESifo Group Munich.
  9. Husain, Muhammad Jami, 2009. "Contribution of health to economic development: a survey and overview," Economics Discussion Papers 2009-40, Kiel Institute for the World Economy.
  10. Bonatti, Luigi & Felice, Giulia, 2008. "Endogenous growth and changing sectoral composition in advanced economies," Structural Change and Economic Dynamics, Elsevier, vol. 19(2), pages 109-131, June.
  11. Andreas Dietrich, 2012. "Does growth cause structural change, or is it the other way around? A dynamic panel data analysis for seven OECD countries," Empirical Economics, Springer, vol. 43(3), pages 915-944, December.
  12. Gries, Thomas & Naude, Wim, 2008. "Entrepreneurship and Structural Economic Transformation," Working Paper Series RP2008/62, World Institute for Development Economic Research (UNU-WIDER).
  13. Marc Pomp & Suncica Vujic, 2008. "Rising health spending, new medical technology and the Baumol effect," CPB Discussion Paper 115, CPB Netherlands Bureau for Economic Policy Analysis.
  14. Rubinstein, A., 2012. "Trends and Regularities of Consumption in the Performing Arts," Journal of the New Economic Association, New Economic Association, vol. 14(2), pages 158-164.
  15. Bates, Laurie J. & Santerre, Rexford E., 2013. "Does the U.S. health care sector suffer from Baumol's cost disease? Evidence from the 50 states," Journal of Health Economics, Elsevier, vol. 32(2), pages 386-391.

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