II.I The Baumol effect is often referred to in critiques of state management of the economy and describes the tendency of wages to increase in unproductive sectors to prevent the flight of workers who would otherwise take up work in productive sectors, sectors where wages increase in line with productivity.
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Chapter Three - II. Baumol Effect and Cost…
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II.I The Baumol effect is often referred to in critiques of state management of the economy and describes the tendency of wages to increase in unproductive sectors to prevent the flight of workers who would otherwise take up work in productive sectors, sectors where wages increase in line with productivity.