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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in: R&D and Productivity: The Econometric Evidence, pages 347-374
National Bureau of Economic Research, Inc.
- Barro, Robert J, 1999.
"Notes on Growth Accounting,"
Journal of Economic Growth,
Springer, vol. 4(2), pages 119-37, June.
- Baumol, William J. & Wolff, Edward N., 1984.
"On Interindustry Differences in Absolute Productvity,"
84-03, C.V. Starr Center for Applied Economics, New York University.
- Baumol, William J & Wolff, Edward N, 1984. "On Interindustry Differences in Absolute Productivity," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1017-34, December.
- D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
- Charles R. Hulten, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 511-518.
- Ramana Ramaswamy & Bob Rowthorn, 1997. "Deindustrialization; Causes and Implications," IMF Working Papers 97/42, International Monetary Fund.
- Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1.
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