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Disease or utopia? Testing Baumol in education

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  • Chen, Xin
  • Moul, Charles C.

Abstract

Baumol’s Cost Disease offers a compelling hypothesis of rising unit costs in stagnant sectors, but increased productivity in progressive sectors may generate the same prediction through income effects. We examine quantity (rather than expenditure) data from the U.S. educational sector to distinguish between these explanations. Our results indicate significant negative impacts of manufacturing productivity on teacher–pupil ratios.

Suggested Citation

  • Chen, Xin & Moul, Charles C., 2014. "Disease or utopia? Testing Baumol in education," Economics Letters, Elsevier, vol. 122(2), pages 220-223.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:220-223
    DOI: 10.1016/j.econlet.2013.11.032
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    References listed on IDEAS

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    1. Hartwig, Jochen, 2008. "What drives health care expenditure?--Baumol's model of 'unbalanced growth' revisited," Journal of Health Economics, Elsevier, vol. 27(3), pages 603-623, May.
    2. Tyler Cowen, 1996. "Why I do not believe in the cost-disease," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 20(3), pages 207-214, September.
    3. Robinson, Joan, 1969. "Macroeconomics of Unbalanced Growth: A Belated Comment," American Economic Review, American Economic Association, vol. 59(4), pages 633-633, Part I Se.
    4. Colombier, Carsten, 2012. "Drivers of health care expenditure: Does Baumol's cost disease loom large?," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 12-5, University of Cologne, FiFo Institute for Public Economics.
    5. Jochen Hartwig, 2011. "Can Baumol's model of unbalanced growth contribute to explaining the secular rise in health care expenditure? An alternative test," Applied Economics, Taylor & Francis Journals, vol. 43(2), pages 173-184.
    6. Bates, Laurie J. & Santerre, Rexford E., 2013. "Does the U.S. health care sector suffer from Baumol's cost disease? Evidence from the 50 states," Journal of Health Economics, Elsevier, vol. 32(2), pages 386-391.
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    Cited by:

    1. Catalin Dragomirescu-Gaina, 2015. "An empirical inquiry into the determinants of public education spending in Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-24, December.

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    More about this item

    Keywords

    Education costs; Baumol cost disease; Teacher–pupil ratios;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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