Productivity Growth in Service Industries – Has «Baumol's Disease» Really Been Cured?
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Author
Date
2006-11Type
- Working Paper
ETH Bibliography
yes
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Abstract
Since the mid-nineties, U.S. labor productivity outgrows its European counterpart by a wide margin. Several recent studies have found that this result is brought about by relatively few service industries, where productivity growth has accelerated in the U.S., but not so in Europe. Based on this finding, TRIPLETT/BOSWORTH (2003) have asserted that ‘Baumol’s Disease’, according to which imbalances in productivity growth between a ‘progressive’ (manufacturing) and a ‘nonprogressive’ (service) sector of the economy lead to constant expenditure shifts into the latter, ‘has been cured’ – at least in the U.S. The present paper challenges this statement, showing that there is only one genuine service industry with a lasting increase in productivity, namely wholesale and retail trade. Labor productivity in the U.S. retail industry has grown fast due to a recent proliferation of Wal-Mart-type ‘big box’ stores that would be practically impossible in Europe because of stricter zoning plans. Since this ‘Wal-Mart effect’ is likely to taper off sooner or later, it is more accurate to say that ‘Baumol’s Disease’ has been protracted than to say that it has been cured. Show more
Permanent link
https://doi.org/10.3929/ethz-a-005277187Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
DIENSTLEISTUNGSUNTERNEHMEN; Statistical artifacts; COMPANY GROWTH + COMPANY EXPANSION (BUSINESS POLICY); DIENSTLEISTUNGEN (WIRTSCHAFT); PRODUKTIVITÄT (BETRIEBSWIRTSCHAFT); PRODUCTIVITY (BUSINESS ECONOMICS); Services sector; Baumol's Disease; Productivity; SERVICES (ECONOMY); SERVICE COMPANIES; UNTERNEHMENSWACHSTUM + UNTERNEHMENSEXPANSION (UNTERNEHMENSPOLITIK)Organisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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Is source of: https://doi.org/10.3929/ethz-b-000125204
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