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Baumol's Diseases: A Macroeconomic Perspective

  • William D. Nordhaus

William Baumol and his co-authors have analyzed the impact of differential productivity growth on the health of different sectors and on the overall economy. They argued that technologically stagnant sectors experience above average cost and price increases, take a rising share of national output, and slow aggregate productivity growth. Using industry data for the period 1948-2001, the present study investigates Baumol%u2019s diseases for the overall economy. It finds that technologically stagnant sectors clearly have rising relative prices and declining relative real outputs. Additionally, technologically progressive sectors tend to have slower hours and employment growth outside of manufacturing. Finally, sectoral shifts have tended to lower overall productivity growth as the share of stagnant sectors has risen over the second half of the twentieth century.

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File URL: http://www.nber.org/papers/w12218.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12218.

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Date of creation: May 2006
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Publication status: published as Nordhaus William D, 2008. "Baumol's Diseases: A Macroeconomic Perspective," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-39, February.
Handle: RePEc:nbr:nberwo:12218
Note: EFG PR
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