Long-Run Economic Growth

1200-2010 GDP per capita (Maddison Data)

1700-2010 GDP per capita (Maddison Data)

1800-2010 GDP per capita (Maddison Data)

1900-2010 GDP per capita (Maddison Data)

Cross-section of Countries

Countries with GDP per capita lower than $1.5K

Countries with GDP per capita higher than $40K

2014 GDP per capita (Penn World Tables)

Baumol (1967); Baumol and Bowen (1968)

Idea

  • Services industry sees less rapid productivity gains.

  • Therefore, services are an increasingly larger share of the economy.

  • This is an important fact, because some deindustrialization is needed.

Productivity gains low in Services

Manufacturing Productivity

Productivity gains low in Services

Productivity gains low in Services

Balassa-Samuelson Effect

Idea

Bibliography

Baumol, William J. 1967. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” The American Economic Review 57 (3): 415–26. https://www.jstor.org/stable/1812111.

Baumol, William J., and William G. Bowen. 1968. Performing Arts, the Economic Dilemma: A Study of Problems Common to Theater, Opera, Music and Dance. M.I.T. Press.