In 2021, Vice Premier Liu He delivered a speech at the World Internet Conference, and pointed out that digital technology has profoundly changed the production function and created new business format, helping to overcome the Baumol's disease as well as digital divide, and achieve inclusive growth.
Firstly, this article summarizes the characteristics of the Baumol's disease.
1. The productivity of the service industry is lower than that of the manufacturing industry.
2. The synchronization of wage levels in the service industry and manufacturing industry has led to a continuous increase in production costs.
3. The transfer of labor from manufacturing industry to service industry has led to an increase of the proportion of the service industry in the national economy, resulting in a structural slowdown of economic growth.
Secondly, this article summarizes the characteristics of digitalization of the service industry.
1. The digital transformation has spread from communication technology and software service to other service industries, presenting a reverse penetration from the tertiary industry to the secondary industry.
2. Digital elements are noncompetitive and have zero marginal production costs, making the scaling up of the service industry possible.
3. The interaction between productive service industry and manufacturing industry is strong, and the digital development provides the possibility to blur their boundary.
Regarding the characteristics of the Baumol's disease and the digitalization of the service industry, industrial digitization can break through the Baumol's disease through the following methods.
1. Improve the productivity of stagnant sectors.
2. Control unnecessary costs of stagnant sectors.
3. Expand the proportion of high-efficiency sectors.
