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The Two Waves of Service-Sector Growth

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  • Barry Eichengreen

    (ICRIER)

  • Poonam Gupta

Abstract

The positive association between the service sector share of output and per capita income is one of the best-known regularities in all of growth and development economics. Yet there is less than complete agreement on the nature of that association. Here we identify two waves of service sector growth, a first wave in countries with relatively low levels of per capita GDP and a second wave in countries with higher per capita incomes. The first wave appears to be made up primarily of traditional services, the second wave of modern (financial, communication, computer, technical, legal, advertising and business) services that are receptive to the application of information technologies and increasingly tradable across borders. In addition, there is evidence of the second wave occurring at lower income levels after 1990. But this change in the second wave is not equally evident in all economies : it is most apparent in democracies, in countries that are open to trade, and in those that are relatively close to the major global financial centers. This points to both political and economic conditions that can help countries capitalize on the opportunities afforded by an increasingly globalized post-industrial economy.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22914.

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Date of creation: Jan 2009
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Handle: RePEc:eab:develo:22914

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Keywords: Services; Growth; Structural change; traditional services modern services;

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References

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  1. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents, Nobel Prize Committee 1971-2, Nobel Prize Committee.
  2. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 1997. "Beyond Balanced Growth," NBER Working Papers, National Bureau of Economic Research, Inc 6159, National Bureau of Economic Research, Inc.
  3. Syrquin, M. & Chenery, H.B., 1989. "Patterns Of Development, 1950 To 1983," World Bank - Discussion Papers, World Bank 41, World Bank.
  4. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, Elsevier, vol. 12(2), pages 171-174, June.
  5. Ark, Bart van & Inklaar, Robert & McGuckin, Robert H., 2003. "ICT and productivity in Europe and the United States," CCSO Working Papers, University of Groningen, CCSO Centre for Economic Research 200311, University of Groningen, CCSO Centre for Economic Research.
  6. Buera, Francisco J. & Kaboski, Joseph P., 2012. "Scale and the origins of structural change," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(2), pages 684-712.
  7. Allan G. B. Fisher, 1939. "Production, Primary, Secondary And Tertiary," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 15(1), pages 24-38, 06.
  8. J. Bradford Jensen & Lori G. Kletzer, 2005. "Tradable Services: Understanding the Scope and Impact of Services Outsourcing," Working Paper Series, Peterson Institute for International Economics WP05-9, Peterson Institute for International Economics.
  9. Francisco J. Buera & Joseph P. Kaboski, 2012. "The Rise of the Service Economy," American Economic Review, American Economic Association, American Economic Association, vol. 102(6), pages 2540-69, October.
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  11. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers, Center for International Development at Harvard University 1, Center for International Development at Harvard University.
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Citations

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Cited by:
  1. Fernando Alexandre & Pedro Bação, 2012. "Portugal before and after the European Union: Facts on Nontradables," NIPE Working Papers, NIPE - Universidade do Minho 15/2012, NIPE - Universidade do Minho.
  2. Prof. Frank Westermann Ph.D., 2012. "Linkages between Sectoral Output Growth and Financial Development in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, Nepal Rastra Bank, Research Department, vol. 24(2), pages 15-30, October.
  3. Alexander Vogel & Joachim Wagner, 2012. "The Quality of the KombiFiD-Sample of Business Services Enterprises: Evidence from a Replication Study," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 226, University of Lüneburg, Institute of Economics.
  4. Achim Schmillen, 2011. "Are Wages Equal Across Sectors of Production? A Panel Data Analysis for Tradable and Non-Tradable Goods," Working Papers, Bavarian Graduate Program in Economics (BGPE) 102, Bavarian Graduate Program in Economics (BGPE).
  5. Eichengreen, Barry & Gupta, Poonam, 2012. "Exports of Services: Indian Experience in Perspective," MPRA Paper, University Library of Munich, Germany 37409, University Library of Munich, Germany.
  6. repec:nrb:journl:v:24:y:2012:i:2:p:2 is not listed on IDEAS
  7. Jianghuai Zheng & Lili Zhang & Yu Wang, 2011. "The underdevelopment of service industry in china: An empirical study of cities in Yangtze River Delta," Frontiers of Economics in China, Springer, Springer, vol. 6(3), pages 413-446, September.
  8. Krushna Mohan Pattanaik, 2010. "Challenges and Prospects in the Measurement of Trade in Services," Working Papers, Institute for Social and Economic Change, Bangalore 241, Institute for Social and Economic Change, Bangalore.
  9. Rajeev H. Dehejia & Arvind Panagariya, 2014. "Trade Liberalization in Manufacturing and Accelerated Growth in Services in India," NBER Working Papers, National Bureau of Economic Research, Inc 19923, National Bureau of Economic Research, Inc.
  10. Zheng, Jianghuai & Zhang, Lili & Wang, Yu, 2010. "The underdevelopment of service industry in China: an empirical study of cities in Yangtze River Delta," MPRA Paper, University Library of Munich, Germany 33125, University Library of Munich, Germany, revised Jun 2011.
  11. Gupta, Poonam & Kumar, Utsav, 2010. "Performance of Indian Manufacturing in the Post Reform Period," MPRA Paper, University Library of Munich, Germany 24898, University Library of Munich, Germany.
  12. Lee, Jong-Wha & McKibbin, Warwick J., 2014. "Service Sector Productivity and Economic Growth in Asia," ADBI Working Papers, Asian Development Bank Institute 490, Asian Development Bank Institute.
  13. Sen, Chitrakalpa, 2011. "FDI in the Service Sector – Propagator of Growth for India?," MPRA Paper, University Library of Munich, Germany 30574, University Library of Munich, Germany.

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