Has Baumol's Cost Disease disappeared in the performing arts?

Abstract

According to Baumol's Cost Disease unit labour costs in the performing arts regularly increase because the wage rates rise more quickly than labour productivity, resulting in a secular threat to survival. In contrast, musical festivals have boomed. Festivals cater particularly well for tourists endowed with steadily increasing incomes. Festivals have prospered because they hire artists and other staff at low marginal cost and evade the restrictions imposed by government and unions. They therefore produce more efficiently and attract more sponsors. The “innnovation” of festivals overcomes Baumol's Disease while it remains virulent in the conventional venues.