Productivity Measurement Issues in Services Industries: “Baumol’s Disease” Has Been Cured

[...]As we documented in a longer version of this paper (Triplettand Bosworth forthcoming), labor productivity growth in theservices industries after 1995 was a broad acceleration, not justconfined to one or two industries, as has sometimes beensupposed. Using the 1977-95 period as the base, we showedthat fifteen of twenty-two U.S. two-digit services industriesexperienced productivity acceleration. Both the rate of LPimprovement in services after 1995 and its acceleration equaledthe economywide average. That is why we said “Baumol’sDisease has been cured.”1We also examined the sources of labor productivity growth.The major source of the LP acceleration in services industrieswas a great expansion in services industry multifactorproductivity (MFP) after 1995. It went from essentially zero inthe earlier period to 1.4 percent per year, on a weighted basis.As MFP is always a small number, that is a huge expansion.[...]