New indices of labour productivity growth: Baumol’s disease revisited

Hideyuki Mizobuchi

MPRA Paper from University Library of Munich, Germany

Abstract: We introduce two new indexes of labour productivity growth. Both indexes are intended to capture the shift in the short-run production frontier, which can be attributed to technological progress or growth in capital inputs. The two indexes adopt distinct approaches to measuring the distance between the production frontiers. One is based on the distance function and the other is based on the profit function. In the end, we show that these two theoretical measures coincide with the index number formulae that are computable from the observable prices and quantities of output and input. By applying these formulae to the U.S. industry data of the years 1970–2005, we compare newly proposed index of labour productivity growth with the growth of average labour productivity over periods and across industries. We revisit the hypothesis of Baumol’s disease throughout our observations on the trend of industry labour productivities in the service sector.

Keywords: Labour productivity; index numbers; Malmquist index; Törnqvist index; output distance function; input distance function; Baumol’s disease; service sector (search for similar items in EconPapers)
JEL-codes: A14 D24 O47 O51 (search for similar items in EconPapers)
Date: 2010-09-20
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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