Question

Countries that shift from a manufacturing-oriented economy to a service-oriented economy sometimes see their productivity growth decline over time. This phenomenon is called

Answer 1

Answer:

Baumol’s disease is a phenomenon where the countries would switch from manufacturing-oriented economy to the service oriented economy. During this transition, there are chances of the productivity slumping down over a period of time.

The reason for reduction of productivity is because manufacturing good are supplied globally, but services are given locally. Moreover, GDP of manufacturing productivity grows faster than service sector productivity.

Explanation: