Baumol’s Model and Unbalanced Productivity Growth
Does Baumol’s disease exist in China in a time of robotisation and automation?
L. WANG (TU Delft - Technology, Policy and Management)
Servaas Storm (TU Delft - Economics of Technology and Innovation)
More Info
expand_more
Other than for strictly personal use, it is not permitted to download, forward or distribute the text or part of it, without the consent of the author(s) and/or copyright holder(s), unless the work is under an open content license such as Creative Commons.
Abstract
Baumol's unbalanced growth model predicts the tendency of aggregate productivity growth to slow down in the process of tertiarisation. This thesis studies the relationship between employment structural changes and aggregate productivity growth in the case of China. William Nordhaus’s (2008) testing methodology will be applied to the China Industrial Productivity (CIP) Database that follows the KLEMS principles. The results suggest that there is a significant sign of Baumol’s cost disease in China during 1987-2010. Moreover, with more and more workers tolerating lower pay in the stagnant sectors, aggregate demand growth in the market will slow down. Eventually, the unbalanced growth may lead to economic stagnation. Hence, it is necessary to intervene in income distribution through fiscal and monetary policies to make the workers in the stagnant industries benefit from the technological progress.