Working Paper: NBER ID: w12218
Authors: William D. Nordhaus
Abstract: 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's 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.
Keywords: No keywords provided
JEL Codes: D4; O3; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low productivity growth (O49) | higher relative price increases (P22) |
| low productivity growth (O49) | stagnating real output (P24) |
| low productivity growth (O49) | rising share of nominal output (F62) |
| low productivity growth (O49) | declining relative employment and hours worked (J29) |