https://macropaperwarehouse.com/authors/martin-shu/Martin ShuHugo -- gohugo.ioen-usThu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/selection-structural-transformation-and-the-cost-disease-of-services/Thu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/selection-structural-transformation-and-the-cost-disease-of-services/<p>This paper asks whether worker self-selection, rather than slow technological progress, can explain the low measured labor productivity growth in the U.S. service sector — a phenomenon known as Baumol&rsquo;s cost disease. The conventional view, associated with Young (2014), is that as workers reallocate from manufacturing into services, the incoming workers are less skilled than incumbents, mechanically depressing measured productivity; on that view, the cost disease might be a transient mismeasurement artifact rather than a permanent technological fact. Shu challenges this interpretation by showing that the selection pattern differs sharply across service sub-sectors and is far weaker in aggregate than the conventional model predicts.</p>