How Much Can Engel's Law and Baumol's Disease Explain the Rise of Service Employment in the United States?

@article{Ican2010HowMC,
  title={How Much Can Engel's Law and Baumol's Disease Explain the Rise of Service Employment in the United States?},
  author={Talan B. Işcan},
  journal={The B.E. Journal of Macroeconomics},
  year={2010},
  volume={10}
}
  • T. Işcan
  • Published 30 January 2010
  • Economics
  • The B.E. Journal of Macroeconomics
High income elasticity of demand for services and low income elasticity of demand for food (Engel's law), and relatively slow productivity growth in the service sectors (Baumol's disease) have been viewed as key drivers of rising share of services in employment in the United States during the 20th century. How much of the rising share of services can be explained by these two forces? A calibrated model of structural change shows that jointly Engel's law and Baumol's disease could explain about… 

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