Baumol’s Model and Unbalanced Productivity Growth

Does Baumol’s disease exist in China in a time of robotisation and automation?

Master thesis (2021)

Authors

L. WANG Technology, Policy and Management

Contributors

Cees van Beers Economics of Technology and Innovation - TPM (coach)
S.T.H. Storm Economics of Technology and Innovation - TPM (supervisor 1)
N. Mouter Transport and Logistics - TPM (supervisor 2)
Faculty
Technology, Policy and Management
Copyright: © 2021 LUDAN WANG
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Published Date

17-08-2021

Language

English

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Faculty

Technology, Policy and Management

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.