Time and productivity growth in services: how motion pictures industrialized entertainment
When taking into account time, services can experience similar productivity gains as manufacturing. Motion pictures constituted the first technology that industrialized a labour-intensive service. Measuring output in time spent consuming them doubles output growth from 4.2 to as much as 9 percent per annum, accounting for 2 percent of U.S. GDP-growth between 1900 and 1938. Pure productivity growth caused 60 percent of this, their growing GDP-share 24 percent, and input transfers and physical capital each 8 percent. Falling ticket prices and rising opportunity costs kept the full-cost per spectator-hour constant, suggesting that the surge in demand was caused by rising full incomes and entertainment’s high income elasticity. Imploding prices limited the pictures’ expenditure share and made the economic impact go largely unnoticed.
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