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'Baumol'S Disease', Production Externalities And Productivity Effects Of Intersectoral Transfers


  • Claudio De Vincenti


This paper presents a model that introduces in an unbalanced growth framework à la Baumol the hypothesis of an endogenous productivity growth due to a positive externality of the service sector on manufacturing productivity and a learning-by-doing process inside both sectors. The model shows that a policy aimed at keeping the ratio between outputs in the two sectors constant in real terms may improve the aggregate productivity performance of the economy, depending on the parameters' values. Then the model derives the dynamics of the intersectoral transfer which is necessary to keep the ratio between outputs constant, and verifies that the amount of the transfer turns out to be always lower than the output of the manufacturing sector, and only asymptotically approaches it. Copyright © 2007 The Author; Journal compilation © 2007 Blackwell Publishing Ltd.

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  • Claudio De Vincenti, 2007. "'Baumol'S Disease', Production Externalities And Productivity Effects Of Intersectoral Transfers," Metroeconomica, Wiley Blackwell, vol. 58(3), pages 396-412, July.
  • Handle: RePEc:bla:metroe:v:58:y:2007:i:3:p:396-412

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    References listed on IDEAS

    1. Palley, Thomas I, 2001. "The Stock Market and Investment: Another Look at the Micro-foundations of q Theory," Cambridge Journal of Economics, Oxford University Press, vol. 25(5), pages 657-667, September.
    2. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    3. Eckhard Hein, 2012. "The Macroeconomics of Finance-Dominated Capitalism – and its Crisis," Books, Edward Elgar Publishing, number 14931.
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    Cited by:

    1. Hiroshi Nishi, 2016. "Sources and Consequences of Productivity Growth Dynamics: Is Japan Suffering from Baumol's Diseases?," Discussion papers e-16-003, Graduate School of Economics , Kyoto University.
    2. Hiroaki Sasaki, 2011. "Export of Deindustrialization and Anti-Balassa-Samuelson Effect: The Consequences of Productivity Growth Differential," Discussion papers e-10-015, Graduate School of Economics Project Center, Kyoto University.
    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. Hartwig, Jochen, 2012. "Testing the growth effects of structural change," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 11-24.
    5. Borgersen, Trond-Arne & King, Roswitha M., 2015. "Endogenous supply side constraints to export-led growth and aggregate growth implications in transition economies," Structural Change and Economic Dynamics, Elsevier, vol. 33(C), pages 96-109.
    6. 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;Higher Education Press, vol. 6(3), pages 413-446, September.
    7. Hiroaki Sasaki, 2014. "Is Growth Declining in the Service Economy?," Discussion papers e-14-007, Graduate School of Economics Project Center, Kyoto University.
    8. 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.

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