TITLE:
Does Change in the Employment Structure Cause Baumol’s Disease? Evidence from Shenzhen and Hong Kong, China
AUTHORS:
Fanji Shi
KEYWORDS:
Baumol’s Disease, Total Production Growth Rate, Employment Structure, Labour Costs, Economic Growth
JOURNAL NAME:
Modern Economy,
Vol.11 No.11,
November
19,
2020
ABSTRACT: “Baumol’s disease” refers to the phenomenon whereby
labour flows from a high growth sector to a low growth sector, which eventually
leads to a decline in regional economic growth. In this paper, we constructed
an alternative model for evaluating Baumol’s disease, and conducted an
empirical analysis of the industry sectors in Shenzhen and Hong Kong, China.
The results showed that 1) from 2005 to 2016, labour flowed from the high
growth sectors to the low growth sectors in both Shenzhen and Hong Kong, and
the labour costs increased in the inflow sectors. 2) Shenzhen showed symptoms
of the first stage of Baumol’s disease; that is, a change in the total factor
production (TFP) growth rate led to a change in the employment structure. 3)
Hong Kong showed symptoms of the second and third stages of Baumol’s disease,
which meant that the change in the employment structure increased the labour
costs of the inflow sector, which slowed the rate of regional economic growth.
4) The changes in the employment structure in Hong Kong indicated that the
region had been infected with Baumol’s disease, while Shenzhen was at risk of
being infected. The research can provide a method to judge Baumol’s disease in
the different regions and provide suggestions for formulating the relevant
policies.