Macroeconomics of Unbalanced Growth: Comment.

This article comments on William Baumol's research on the macroeconomics of unbalanced economic growth. According to the author the study of Baumol has developed a model of two sector economy: (1) a progressive sector where labor-saving technical change takes place (2) a non-progressive sector where there is no technical change. The author argues that if the income elasticity of municipal taxes is below unity, the financial problems of cities will grow, provided that the level of services remains unchanged. The author stated that this could happen if the municipal tax base does not grow as fast as labor income.