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Baumol’s Cost-Disease, Efficiency, and Productivity in the Performing Arts: An Analysis of German Public Theaters

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  • Anne-Kathrin Last

    (Institute of Economics, Leuphana University of Lüneburg, Germany)

  • Heike Wetzel

    (University of Cologne, Department of Economics, Endowed Chair of Energy Economics, Affiliated Researcher of the Institute of Energy Economics (EWI))

Abstract

This paper analyzes the productivity development in the German public theater sector for the seasons 1991/1992-2005/2006. Using a stochastic distance frontier approach that allows to decompose total factor productivity change into different sources we examine (a) whether Baumol’s cost-disease hypothesis is valid in this sector and (b) if so, whether its negative influence on productivity can be compensated by efficiency gains. The findings indicate an increase in real unit labor cost as a result of rising wage rates and, thus, support the cost- disease hypothesis. Furthermore, increasing returns to scale are observed for the majority of the theaters which implies that significant efficiency gains can be realized by the exploitation of scale economies. However, because of the increasing unit labor cost and an increasing scale inefficiency we find an overall decrease in average productivity of about 8 percent within the sample period.

Suggested Citation

  • Anne-Kathrin Last & Heike Wetzel, 2010. "Baumol’s Cost-Disease, Efficiency, and Productivity in the Performing Arts: An Analysis of German Public Theaters," Working Paper Series in Economics 173, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:173
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    1. Anne-Kathrin Last & Heike Wetzel, 2010. "The efficiency of German public theaters: a stochastic frontier analysis approach," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(2), pages 89-110, May.
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    Cited by:

    1. Víctor Fernández-Blanco & Ana Rodríguez-Álvarez & Aleksandra Wiśniewska, 2019. "Measuring technical efficiency and marginal costs in the performing arts: the case of the municipal theatres of Warsaw," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(1), pages 97-119, March.
    2. Victor Fernandez-Blanco & Ana Rodriguez-Alvarez, 2015. "Measuring allocative efficiency in cultural economics: The case of Fundacion Princesa de Asturias," ACEI Working Paper Series AWP-09-2015, Association for Cultural Economics International, revised Oct 2015.
    3. Sacit Hadi Akdede & Victor A. Ginsburgh & Aynur Uckac, 2018. "Do Contemporary Plays Feature Fewer Roles? Some Empirical Evidence," ACEI Working Paper Series AWP-01-2018, Association for Cultural Economics International, revised Jun 2018.
    4. Castiglione, Concetta & Infante, Davide & Zieba, Marta, 2023. "Public support for performing arts. Efficiency and productivity gains in eleven European countries," Socio-Economic Planning Sciences, Elsevier, vol. 85(C).
    5. Milton Marquis, 2013. "Bringing Culture to Macroeconomics," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(3), pages 301-315, September.
    6. Víctor Fernández-Blanco & Ana Rodríguez-Álvarez, 2018. "Measuring allocative efficiency in Cultural Economics: the case of “Fundación Princesa de Asturias” (The Princess of Asturias Foundation)," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(1), pages 91-110, February.
    7. Guccio, Calogero & Martorana, Marco & Mazza, Isidoro & Pignataro, Giacomo & Rizzo, Ilde, 2020. "An assessment of the performance of Italian public historical archives: Preservation vs utilisation," Journal of Policy Modeling, Elsevier, vol. 42(6), pages 1270-1286.
    8. Castiglione, Concetta & Infante, Davide & Zieba, Marta, 2024. "Is it worth subsidising the cultural sector? New insights from Italian theatre companies," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 20-38.
    9. Concetta Castiglione & Davide Infante & Marta Zieba, 2018. "Technical efficiency in the Italian performing arts companies," Small Business Economics, Springer, vol. 51(3), pages 609-638, October.
    10. Sacit Hadi Akdede & Victor Ginsburgh & Aynur Uçkaç, 2018. "Do More Recent Theater Plays Feature Fewer Roles?," Working Papers ECARES 2018-14, ULB -- Universite Libre de Bruxelles.
    11. Pang, Rui-Zhi & Deng, Zhong-Qi & Hu, Jin-li, 2015. "Clean energy use and total-factor efficiencies: An international comparison," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1158-1171.
    12. Miriam Sebova, 2018. "Economic Efficiency of Cultural Institutions: The Case of Museums in Slovakia," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 14(4), pages 203-214.
    13. Malgorzata Galecka & Katarzyna Smolny, 2021. "Productivity of Public Theatres in the Times of COVID-19: The Example of Polish Theatres," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 667-678.
    14. Annie Tubadji, 2021. "Culture and mental health resilience in times of COVID-19," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(4), pages 1219-1259, October.

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    More about this item

    Keywords

    Public theaters; cost-disease; efficiency; stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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