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

Mizobuchi, Hideyuki (2010): New indices of labour productivity growth: Baumol’s disease revisited.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Labour productivity, index numbers, Malmquist index, Törnqvist index, output distance function, input distance function, Baumol’s disease, service sector
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O51 - U.S. ; Canada; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; A - General Economics and Teaching > A1 - General Economics > A14 - Sociology of Economics

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