TY - JOUR

T1 - Baumol's cost disease, efficiency, and productivity in the performing arts

T2 - An analysis of german public theaters

AU - Last, Anne Kathrin

AU - Wetzel, Heike

PY - 2011/8

Y1 - 2011/8

N2 - This paper analyzes the productivity development in the German public theater sector for the seasons 1991/1992 to 2005/2006. Using a stochastic distance frontier approach that allows decomposing total factor productivity change into different sources, we examine (a) whether Baumol's cost-disease hypothesis is valid in this sector and (b) if so, whether any negative influence of the cost-disease effect on productivity can be compensated by efficiency gains. The findings indicate an increase in real unit labor cost as a result of rising wage rates and thus do support the cost-disease hypothesis. Further, increasing returns to scale are observed for the majority of the theaters, implying that significant efficiency gains can be realized by the exploitation of scale economies. However, because of the increasing unit labor cost and an increasing scale inefficiency, we find an overall decrease in average productivity of about 8% within the sample period.

AB - This paper analyzes the productivity development in the German public theater sector for the seasons 1991/1992 to 2005/2006. Using a stochastic distance frontier approach that allows decomposing total factor productivity change into different sources, we examine (a) whether Baumol's cost-disease hypothesis is valid in this sector and (b) if so, whether any negative influence of the cost-disease effect on productivity can be compensated by efficiency gains. The findings indicate an increase in real unit labor cost as a result of rising wage rates and thus do support the cost-disease hypothesis. Further, increasing returns to scale are observed for the majority of the theaters, implying that significant efficiency gains can be realized by the exploitation of scale economies. However, because of the increasing unit labor cost and an increasing scale inefficiency, we find an overall decrease in average productivity of about 8% within the sample period.

KW - Cost disease

KW - Efficiency

KW - Productivity

KW - Public theaters

KW - Stochastic frontier analysis

KW - Economics

UR - http://www.scopus.com/inward/record.url?scp=80052381071&partnerID=8YFLogxK

U2 - 10.1007/s10824-011-9143-5

DO - 10.1007/s10824-011-9143-5

M3 - Journal articles

AN - SCOPUS:80052381071

VL - 35

SP - 185

EP - 201

JO - Journal of Cultural Economics

JF - Journal of Cultural Economics

SN - 0885-2545

IS - 3

ER -