Application of Baumol's Cost Disease to Public Sector Services: Conceptual, theoretical and empirical falsities

This paper argues that justifying lack of productivity improvements in public services by referring to Baumol's Cost Disease (BCD) is conceptually confused, theoretically misspecified and empirically blind. BCD misconceptualizes public services as categorically distinct from manufactured goods...

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Bibliographic Details
Published in:Public management review 2016-01, Vol.18 (1), p.91-109
Main Authors: Bailey, Stephen J., Anttiroiko, Ari-Veikko, Valkama, Pekka
Format: Article
Language:English
Subjects:
Baumol's cost disease
new service economy
Organizational behavior
Organizational behaviour
Productivity
Public administration
Public sector
Public services
service unbundling
Skills
skills decomposition
Studies
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Summary:This paper argues that justifying lack of productivity improvements in public services by referring to Baumol's Cost Disease (BCD) is conceptually confused, theoretically misspecified and empirically blind. BCD misconceptualizes public services as categorically distinct from manufactured goods and is based on a theory of productivity not directly applicable to many public services, therefore failing to recognize evidence of substantial scope for improving public services' productivity. Analysis of the structural and behavioural unbundling of value creation and decomposition of professional skills in service provision leads this paper to conclude that public services are not as technologically non-progressive as BCD asserts.
ISSN:1471-9037
1471-9045
DOI:10.1080/14719037.2014.958092