BAUMOL:UNBALANCED GROWTH 417 degree rather than an absolute dichotomy. The jet airplane has in- yper man hour of a faculty member who is going California to give a lecture.Certainly the mass media have created what may be considered a new set of products that are close substitutes for live performance and by which productivity was increased spectacularly.In addition,there are,as the reader will rec nize,all sorts of intermediate activities which fall bety cog the extreme varieties.Yet,the distinction betw ween the two more productivity industries and those in latively constant h productivity canand does ,and one which,we,of coniderable pr actical importance. In add ition to the separability of activities into our two basic cate- gories I shall utilize three other assumptions,two of them primarily for ease of exposition.The reader will recognize,as we proceed,that neithe is essential to the argument.The first of the incide ys other emise simply in the assertion that all outla consi or ignored.This assertic costs can n ie tently unr d。 c but it simplifies greatly mati A second,far more important.and more assumption is that wages in the two sectors of the economy go up an down together.In the long run there is some degree of mobility in all labor markets and consequently,while wages in one activity can lag behind those in another,unless the former is in process of dis ing altogether we cannot expect the disparity to contin For simplicity I will in the next se tion tak the same in both urly wages to be precisely sectors but the n odel is easily complicated to allow for wage levels and their movements. A final inessential assumption which is,however,not altogether un- realistic,asserts that money wages will rise as rapidly as output per man hour in the sector where productivity is increasing. Since organized labor is not slow to learn of increases in its productivity it is likely to adiust its wage demands according ly.This assu mption ects onl th magnitude of the absolute ice and does not influ- ence the relativ cost l in our model, s and prices that are the critical elements in the analysis. 2.A Model of Unbalanced Expansion Assume that the economy is divided into ty which the productivity of lab sectors,sector one,in constant,while in sector two output per man hour Thus we ha s cumulati at a constant compounded rate.r. ve for the respective valucs of outputs and in the two sectors at time: (1) Yu=aLu ® Ya =bLztert Copyright2001 All Rights Reserved