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Structural Change within the Service Sector and the Future of Baumol's Disease

Author

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  • Valentinyi, Akos
  • Herrendorf, Berthold
  • Duernecker, Georg

Abstract

Structural change contributed to the past slowdown of U.S. productivity growth by reallocating production to stagnant services sectors with low productivity growth. We ask what the future effect of structural change on productivity growth will be. To provide an answer, we study structural change among goods and different services. We find that there are substitutes for stagnant services, which prevents them from taking over the economy in the long run. Our calibrated model implies that in the future structural change will reduce aggregate productivity growth in the U.S. only by about half as much as in the past.

Suggested Citation

  • Valentinyi, Akos & Herrendorf, Berthold & Duernecker, Georg, 2017. "Structural Change within the Service Sector and the Future of Baumol's Disease," CEPR Discussion Papers 12467, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12467
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    More about this item

    Keywords

    Baumol's disease; Productivity growth slowdown; Service sector; Structural change;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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