is strongly confirmed. Technologically stagnant industries have shown slower growth in real output than have the technologically dynamic ones. A one percentage-point higher productivity growth was associated with a three-quarters percentage-point higher real output growth." An important implication of Baumol effect is that it should be expected that, in a world with technological progress, the costs of manufactured goods will tend to fall (as productivity in manufacturing continually increases) while the costs of labor-intensive services like education, legal services, and health care (where productivity growth is persistently slow) will tend to rise (see chart). Affordability While Baumol effect suggests that costs in low-productivity-growth industries will continually rise, Baumol argues the "stagnant-sector services will never become unaffordable to society. This is because the economy's constantly growing productivity simultaneously increases the community's overall purchasing power." To see this, consider an economy with a real national income of $100 billion with healthcare spending amounting to $20 billion (20%), leaving $80 billion for other purchases. Say that, over 50 years, due to productivity growth real national income doubles to $200 billion (an annual growth rate of about 1.4%). To end up with the same amount of income left over after healthcare spending as 50 years prior, healthcare spending would have to rise by 500%, to $120 billion. In this situation, healthcare would no longer take up 20% of national income but fully 60%. If healthcare costs were to rise to anything less than 60% of national income, there would be more money left over for other purchases (for instance, if healthcare costs were to rise from 20% of national income to 40% of national income, there would be $120 billion left over for other purchases—40% more than 50 years prior). So it can be seen that even if productivity growth were to lead to substantial healthcare cost increases through Baumol's cost disease, the wealth increase brought on by that productivity growth would still leave society able to purchase more goods than before. Government spending Baumol effect has major implications for government spending. Since most government spending goes towards services that are subject to the cost disease—law enforcement, education, healthcare etc.—the cost to the government of providing these services will rise as time goes on. Labor force distribution One implication of the Baumol effect is a shift in the distribution of the labor force from high-productivity industries to low-productivity industries. In other words, the effect