This paper presents a model which introduces in an unbalanced growth framework à la Baumol the hypothesis of an endogenous productivity growth due to a positive externality of the service sector on manufacturing productivity and a learning-by-doing process inside both sectors. The model shows that a policy aimed at keeping the ratio between outputs in the two sectors constant in real terms, that is at supporting an increase in the service sector employment share, may improve the aggregate productivity performance of the economy, depending on the elasticity of substitution between services and goods and on the relevance of the externality and learning by doing effects. Then the model derives the dynamics of the intersectoral transfer which is necessary to keep the ratio between outputs constant, and verifies that the amount of the transfer turns out to be always lower than the output of the manufacturing sector, and only asymptotically approaches it. So, the paper adds a productivity-based argument in favour of such a policy and corroborates Baumol’s idea that the productivity growth offers society the resources for the solution of the politico-budgetary problems that stem from the “cost disease”.
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|Titolo:||“Baumol’s Disease”, Production Externalities and Productivity Effects of Intersectoral Transfers|
|Data di pubblicazione:||2007|
|Appartiene alla tipologia:||01a Articolo in rivista|