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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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Publication status: published as Barry Eichengreen & Poonam Gupta, 2013. "The two waves of service-sector growth," Oxford Economic Papers, Oxford University Press, vol. 65(1), pages 96-123, January.
Handle: RePEc:nbr:nberwo:14968

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  1. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents 1971-2, Nobel Prize Committee.
  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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  4. 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.
  5. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
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  7. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers 1, Chicago - Graduate School of Business.
  8. Buera, Francisco J. & Kaboski, Joseph P., 2012. "Scale and the origins of structural change," Journal of Economic Theory, Elsevier, vol. 147(2), pages 684-712.
  9. Ark, Bart van & Inklaar, Robert & McGuckin, Robert H., 2003. "ICT and productivity in Europe and the United States," CCSO Working Papers 200311, University of Groningen, CCSO Centre for Economic Research.
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Cited by:
  1. 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.
  2. Eichengreen, Barry & Gupta, Poonam, 2012. "Exports of Services: Indian Experience in Perspective," Working Papers 12/102, National Institute of Public Finance and Policy.
  3. 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).
  4. repec:nrb:journl:v:24:y:2012:i:2:p:2 is not listed on IDEAS
  5. 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.
  6. Fernando Alexandre & Pedro Bação, 2012. "Portugal Before and After the European Union: Facts on Nontradables," GEMF Working Papers 2013-02, GEMF - Faculdade de Economia, Universidade de Coimbra.
  7. Rajeev H. Dehejia & Arvind Panagariya, 2014. "Trade Liberalization in Manufacturing and Accelerated Growth in Services in India," NBER Working Papers 19923, National Bureau of Economic Research, Inc.
  8. 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.
  9. Krushna Mohan Pattanaik, 2010. "Challenges and Prospects in the Measurement of Trade in Services," Working Papers 241, Institute for Social and Economic Change, Bangalore.
  10. Sen, Chitrakalpa, 2011. "FDI in the Service Sector – Propagator of Growth for India?," MPRA Paper 30574, University Library of Munich, Germany.
  11. 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.
  12. Gupta, Poonam & Kumar, Utsav, 2010. "Performance of Indian Manufacturing in the Post Reform Period," MPRA Paper 24898, University Library of Munich, Germany.

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