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The ‘Growth Disease’ at 50 – Baumol after Oulton

Jochen Hartwig and Hagen Krämer ()

Structural Change and Economic Dynamics, 2019, vol. 51, issue C, 463-471

Abstract: The year 2017 marked the 50th anniversary of William J. Baumol’s seminal model of ‘unbalanced growth’, which predicts the so-called ‘Growth Disease’, i.e., the tendency of aggregate productivity growth to slow down in the process of tertiarisation. In an important contribution published in 2001, however, Nicholas Oulton showed that the shift of resources to the service sector may raise rather than lower aggregate productivity growth if the service industries produce intermediate rather than final products. While Oulton’s reasoning is logically consistent, the question arises whether it is also valid from an empirical point of view. We use 2011 and 2018 releases of EU KLEMS data to determine whether the shift of resources to services has raised or lowered aggregate productivity growth in the G7 countries.

Keywords: Baumol’s disease; Productivity growth; EU KLEMS (search for similar items in EconPapers)
JEL-codes: E24 O14 O41 O47 O57 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:51:y:2019:i:c:p:463-471

DOI: 10.1016/j.strueco.2019.02.006

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