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The Two Waves of Service Sector Growth

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  • Barry Eichengreen
  • 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14968.

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Date of creation: May 2009
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Handle: RePEc:nbr:nberwo:14968

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  1. Syrquin, M. & Chenery, H.B., 1989. "Patterns Of Development, 1950 To 1983," World Bank - Discussion Papers 41, World Bank.
  2. Francisco J. Buera & Joseph P. Kaboski, 2009. "The Rise of the Service Economy," NBER Working Papers 14822, National Bureau of Economic Research, Inc.
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  8. Kuznets, Simon, 1973. "Modern Economic Growth: Findings and Reflections," American Economic Review, American Economic Association, vol. 63(3), pages 247-58, June.
  9. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
  10. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers 1, Center for International Development at Harvard University.
  11. J. Bradford Jensen & Lori G. Kletzer, 2005. "Tradable Services: Understanding the Scope and Impact of Services Outsourcing," Working Paper Series WP05-9, Peterson Institute for International Economics.
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Cited by:
  1. 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 33125, University Library of Munich, Germany, revised Jun 2011.
  2. Krushna Mohan Pattanaik, 2010. "Challenges and Prospects in the Measurement of Trade in Services," Working Papers 241, Institute for Social and Economic Change, Bangalore.
  3. Fernando Alexandre & Pedro Bação, 2012. "Portugal before and after the European Union: Facts on Nontradables," NIPE Working Papers 15/2012, NIPE - Universidade do Minho.
  4. Eichengreen, Barry & Gupta, Poonam, 2012. "Exports of Services: Indian Experience in Perspective," MPRA Paper 37409, University Library of Munich, Germany.
  5. Alexander Vogel & Joachim Wagner, 2012. "The Quality of the KombiFiD-Sample of Business Services Enterprises: Evidence from a Replication Study," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 132(3), pages 393-403.
  6. Achim Schmillen, 2011. "Are Wages Equal Across Sectors of Production? A Panel Data Analysis for Tradable and Non-Tradable Goods," Working Papers 102, Bavarian Graduate Program in Economics (BGPE).
  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, vol. 6(3), pages 413-446, September.
  8. Prof. Frank Westermann Ph.D., 2012. "Linkages between Sectoral Output Growth and Financial Development in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 24(2), pages 15-30, October.
  9. repec:nrb:journl:v:24:y:2012:i:2:p:2 is not listed on IDEAS

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