Author(s)

Fanji Shi^1,2

¹Key Laboratory of Regional Sustainable Development Modeling, Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China.
²College of Resources and Environment, University of Chinese Academy of Sciences, Beijing, China.

“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.

Baumol’s Disease, Total Production Growth Rate, Employment Structure, Labour Costs, Economic Growth

Shi, F. (2020) Does Change in the Employment Structure Cause Baumol’s Disease? Evidence from Shenzhen and Hong Kong, China. Modern Economy, 11, 1791-1809. doi: 10.4236/me.2020.1111122.