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Baumol's Diseases: A Macroeconomic Perspective

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  • Nordhaus William D

    (Yale University)

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's 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.

Suggested Citation

  • 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:bpj:bejmac:v:8:y:2008:i:1:n:9
    DOI: 10.2202/1935-1690.1382
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    Keywords

    productivity; Baumol disease; inflation;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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