Template-type: ReDIF-Paper 1.0  
Author-Name: Adrián Rial Quiroga
Author-Workplace-Name: Instituto Complutense de Estudios Internacionales (ICEI), Universidad Complutense de Madrid.
Title: Baumol's diseases: a subsystem perspective
Abstract: In his paper “Baumol’s diseases: a macroeconomic perspective”, Nordhaus (2008) applies a new testing framework in order to estimate the six hypotheses that lie at 
	the core of Baumol’s (1967) model, following an industry perspective. In this work, I extend Nordhaus’ testing framework to estimate Baumol’s diseases in the US 
	economy over the period 1999-2018 according to a subsystem perspective, by making use of the US Bureau of Economic Analysis input-output tables. In order to check 
	whether Baumol’s diseases depend on the perspective that is followed, I apply both the usual industry perspective and the novel subsystem framework and compare the 
	results. For both subsystems and industries, I do not find robust evidence in favour of the persistent demand hypothesis and the hypothesis of declining nominal value 
	added shares in the progressive sector, while my results do support the cost and price disease hypothesis, the hypothesis of declining employment shares in the 
	progressive sector and the hypothesis of uniform wage growth. As a result, Baumol’s growth disease does not substantially lower aggregate labour productivity growth 
	over the period across both subsystems and industries. This happens mainly because progressive services increase their real output at a faster rate than the economy’s 
	average, restraining the reallocation of nominal value added towards stagnant subsystems or industries and thereby providing a strong palliative against Baumol’s 
	growth disease.
Keywords: Baumol’s diseases; Subsystems; Input-output analysis; Labour productivity growth; US economy
Creation-Date: 2021
Length: 27 pages
Number: 2103
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/wpaper21-03.txt
File-URL: https://eprints.ucm.es/id/eprint/66405/1/WP03-21.pdf
File-Format: Application/pdf
File-Function: Full text
Handle: RePEc:ucm:wpaper:2103