Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited
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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Volume (Year): 53 (2001)
Issue (Month): 4 (October)
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References listed on IDEAS
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.:
- Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-91, April.
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- Barro, Robert J, 1999.
" Notes on Growth Accounting,"
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Springer, vol. 4(2), pages 119-37, June.
- Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, May.
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- Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
- Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
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