Date: 2007
Type: Working Paper
Sustainable Social Spending and Stagnant Public Services: Baumol’s Cost Disease Revisited
Working Paper, EUI ECO, 2007/34
VAN DER PLOEG, Frederick, Sustainable Social Spending and Stagnant Public Services: Baumol’s Cost Disease Revisited, EUI ECO, 2007/34 - https://hdl.handle.net/1814/7335
Retrieved from Cadmus, EUI Research Repository
If demand for human services is inelastic or manufactured goods are necessities, labour shifts from manufacturing to services and the budget share of services rises. Higher productivity growth in the market sector pushes up the tax rate and public employment if private goods and public services are poor substitutes, labour supply is inelastic and there are few dependants. Otherwise, private affluence and public squalor result. More dependants boost public employment if the market provides poor substitutes, but public services per dependent may fall due to tax base erosion. Extensions to market and public employment being imperfect substitutes, varying utility of money and public sector productivity depends on pay.
Cadmus permanent link: https://hdl.handle.net/1814/7335
ISSN: 1725-6704
Series/Number: EUI ECO; 2007/34
Publisher: European University Institute