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 industrial economies, where resources are indeed shifting towards the relatively stagnant service industries. This paper shows that Baumol's conclusion only follows if the stagnant industries produce final products. This is important empirically, since the most rapidly expanding service industries are those such as financial and business services, which are large producers of intermediate products. Even if such industries are stagnant, it is shown that a movement of resources into them may be associated with rising, not falling, aggregate productivity growth.
|Date of creation:||Jan 2000|
|Contact details of provider:|| Postal: Bank of England, Threadneedle Street, London, EC2R 8AH|
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
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.:
- Ramana Ramaswamy & Bob Rowthorn, 1997. "Deindustrialization; Causes and Implications," IMF Working Papers 97/42, International Monetary Fund.
- Charles R. Hulten, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 511-518.
- Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
- D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
- Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 347-374 National Bureau of Economic Research, Inc.
- 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 1017-1034, December.
- Baumol, William J. & Wolff, Edward N., 1984. "On Interindustry Differences in Absolute Productvity," Working Papers 84-03, C.V. Starr Center for Applied Economics, New York University.
- Barro, Robert J, 1999. "Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-137, June.
- Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-191, April.
- Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, December.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:107. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Media Team)
If references are entirely missing, you can add them using this form.