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Baumol’s Cost Disease offers a compelling hypothesis of rising unit costs in stagnant sectors, but increased productivity in progressive sectors may generate the same prediction through income effects. We examine quantity (rather than expenditure) data from the U.S. educational sector to...
Persistent link: https://www.econbiz.de/10010743682
The test’s intuition is that demand estimates in isolation may diverge from demand estimates under joint estimation with cost if the monopoly null hypothesis is false. Simulations indicate that the test can have substantial power using duopoly data.
Persistent link: https://www.econbiz.de/10010594210