IDEAS home Printed from https://ideas.repec.org/a/sav/journl/v70y2022i2p124-143.html
   My bibliography  Save this article

Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?

Author

Listed:
  • Maja Bacovic

    (Faculty of Economics, Department for Economic Analysis and Quantitative Economics)

  • Zivko Andrijasevic

    (University of Montenegro, Faculty of Philosophy, Department for History)

  • Julija Cerovic Smolovic

    (Faculty of Economics, Department for Economic Analysis and Quantitative Economics)

Abstract

Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor? We explored the patterns of structural changes in Europe and found growing relevance of the service sector, particularly knowledge-intensive services. The study shows that labour productivity and TFP growth were lower in the service sector than in the goods sector but were higher in knowledge-intensive services than in other services. GDP per capita growth is positively related to the output’s share of knowledge-intensive services as well as GDP growth and TFP growth in high-income countries, but not in medium-income economies. This might be explained by the rapid growth in the earlier stages of development in less-deve¬loped countries and its subsequent slowdown. Although knowledge-intensive services are the fastest growing sector in all countries, industry is still the most relevant sector for long-term growth, with the highest TFP and labour productivity growth. The growing knowledge-intensive services sector, with its higher TFP growth than other services, partially overcomes the negative effects of expansion of the service sector on long-term output growth. This study shows that R&D investment growth leads to significantly higher output growth in knowledge-intensive services than in other sectors, which may be used as a relevant policy tool.

Suggested Citation

  • Maja Bacovic & Zivko Andrijasevic & Julija Cerovic Smolovic, 2022. "Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(2), pages 124-143, February.
    • Handle: RePEc:sav:journl:v:70:y:2022:i:2:p:124-143
    as

    Download full text from publisher

    File URL: https://www.sav.sk/journals/uploads/0525154202%2022%20Bacovic%20a%20kol.%20+%20SR.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tiago Neves Sequeira & Carla Campos, 2007. "International Tourism and Economic Growth: A Panel Data Approach," Springer Books, in: Álvaro Matias & Peter Nijkamp & Paulo Neto (ed.), Advances in Modern Tourism Research, chapter 0, pages 153-163, Springer.
    2. Peter Bauer & Igor Fedotenkov & Aurelien Genty & Issam Hallak & Peter Harasztosi & David Martinez Turegano & David Nguyen & Nadir Preziosi & Ana Rincon-Aznar & Miguel Sanchez Martinez, 2020. "Productivity in Europe: Trends and drivers in a service-based economy," JRC Research Reports JRC119785, Joint Research Centre.
    3. Dombi, Ákos, 2013. "Economic Growth and Development in Central and Eastern Europe after the Transformation," Public Finance Quarterly, Corvinus University of Budapest, vol. 58(4), pages 452-468.
    4. Maja Bacovic, 2021. "Sectoral Approach in Output Growth Decomposition and its Determinants in Europe," Management & Economics Research Journal, Faculty of Economics, Commercial and Management Sciences, Ziane Achour University of Djelfa, vol. 3(2), pages 1-21, September.
    5. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2006. "How Important are Capital and Total Factor Productivity for Economic Growth?," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 23-49, January.
    6. Dimitri Margaritis & Frank Scrimgeour & Michael Cameron & John Tressler, 2005. "Productivity and Economic Growth in Australia, New Zealand and Ireland," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 12(4), pages 291-308.
    7. Miguel León-Ledesma & Alessio Moro, 2020. "The Rise of Services and Balanced Growth in Theory and Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(4), pages 109-146, October.
    8. Joseph Francois & Bernard Hoekman, 2010. "Services Trade and Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 642-692, September.
    9. Neil Foster-McGregor & Bart Verspagen, 2017. "Decomposing Total Factor Productivity Growth in Manufacturing and Services," Asian Development Review, MIT Press, vol. 34(1), pages 88-115, March.
    10. Olga Arratibel & Frigyes Ferdinand Heinz & Reiner Martin & Marcin Przybyla & Lucasz Rawdanowicz & Roberta Serafini & Tina Zumer, 2007. "Determinants of growth in the central and eastern European EU member states - a production function approach," Occasional Paper Series 61, European Central Bank.
    11. Arratibel, Olga & Heinz, Frigyes Ferdinand & Martin, Reiner & Przybyla, Marcin & Rawdanowicz, Lukasz & Serafini, Roberta & Zumer, Tina, 2007. "Determinants of growth in the central and eastern European EU member states - a production function approach," Occasional Paper Series 61, European Central Bank.
    12. Francisco J. Buera & Joseph P. Kaboski, 2012. "The Rise of the Service Economy," American Economic Review, American Economic Association, vol. 102(6), pages 2540-2569, October.
    13. Moses Abramovitz, 1956. "Resource and Output Trends in the United States since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1.
    14. Moses Abramovitz, 1956. "Resource and Output Trends in the United States since 1870," NBER Chapters, in: Resource and Output Trends in the United States since 1870, pages 1-23, National Bureau of Economic Research, Inc.
    15. Neil Foster-McGregor & Bart Verspagen, 2017. "Decomposing Total Factor Productivity Growth in Manufacturing and Services," Asian Development Review, MIT Press, vol. 34(1), pages 88-115, March.
    16. Joseph E. Stiglitz, 2016. "How to Restore Equitable and Sustainable Economic Growth in the United States," American Economic Review, American Economic Association, vol. 106(5), pages 43-47, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maja Bacovic & Zivko Andrijasevic & Bojan Pejovic, 2022. "STEM Education and Growth in Europe," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2348-2371, September.
    2. Chad Turner & Robert Tamura & Sean Mulholland, 2013. "How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States, 1840–2000?," Journal of Economic Growth, Springer, vol. 18(4), pages 319-371, December.
    3. Kouramoudou Kéïta & Hannu Laurila, 2021. "Corruption and Tax Burden: What Is the Joint Effect on Total Factor Productivity?," Economies, MDPI, vol. 9(1), pages 1-16, March.
    4. repec:agr:journl:v:4(621):y:2019:i:4(621):p:241-264 is not listed on IDEAS
    5. Massimo Del Gatto & Adriana Di Liberto & Carmelo Petraglia, 2011. "Measuring Productivity," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 952-1008, December.
    6. Azam Chaudhry, 2009. "Total Factor Productivity Growthin Pakistan: An Analysis of the Agricultural and Manufacturing Sectors," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 14(Special E), pages 1-16, September.
    7. Danish Ahmed SIDDIQUI & Qazi Masood AHMED, 2019. "Exploring the role of institutions in cross country Malmquist productivity analysis: A two-stage double bootstrap DEA approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(621), W), pages 241-264, Winter.
    8. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2004. "Factor returns, institutions, and geography: a view from trade," FRB Atlanta Working Paper 2004-17, Federal Reserve Bank of Atlanta.
    9. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    10. Thomas Schatzer & Matthias Siller & Janette Walde & Gottfried Tappeiner, 2019. "The Impact of Model Choice on Estimates of Regional TFP," International Regional Science Review, , vol. 42(1), pages 98-116, January.
    11. Federico Inchausti-Sintes & Ubay Pérez-Granja & José Juan Morales-Mohamed, 2021. "Analysing labour productivity and its economic consequences in the two Spanish tourist archipelagos," Tourism Economics, , vol. 27(5), pages 1039-1059, August.
    12. Emmanuel Apergis & Nicholas Apergis, 2019. "“Sakura” has not grown in a day: infrastructure investment and economic growth in Japan under different tax regimes," Empirical Economics, Springer, vol. 57(2), pages 541-567, August.
    13. Paul E. Brockway & Matthew K. Heun & João Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, vol. 10(2), pages 1-23, February.
    14. Keita Kouramoudou, 2017. "Does Corruption Affect Total Factor Productivity? An Empirical Analysis," Working Papers 1714, Tampere University, Faculty of Management and Business, Economics.
    15. Ikonomou, Constantinos, 2023. "Another View on Growth Matters: Investment, Capital, and Solow Residual," MPRA Paper 119003, University Library of Munich, Germany.
    16. Steven Bond-Smith, 2012. "A Regional Model of Endogenous Growth with Creative Destruction," Working Papers in Economics 12/02, University of Waikato.
    17. Michael J. Andrews & Aaron K. Chatterji & Scott Stern, 2021. "Introduction: Beyond 140 Characters," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 1-28, National Bureau of Economic Research, Inc.
    18. Jože P. Damijan & Mark Knell, 2005. "How Important Is Trade and Foreign Ownership in Closing the Technology Gap? Evidence from Estonia and Slovenia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(2), pages 271-295, July.
    19. Jan Fagerberg & Bengt-Åke Lundvall & Martin Srholec, 2018. "Global Value Chains, National Innovation Systems and Economic Development," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(3), pages 533-556, July.
    20. Noel Uri, 2001. "Telecommunications in the United States and Changing Productive Efficiency," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 321-335, September.
    21. Kumar, Sanjesh & Singh, Baljeet, 2019. "Barriers to the international diffusion of technological innovations," Economic Modelling, Elsevier, vol. 82(C), pages 74-86.

    More about this item

    Keywords

    structural changes; output growth; labour productivity; TFP; knowledge-intensive services;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sav:journl:v:70:y:2022:i:2:p:124-143. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Renac (email available below). General contact details of provider: https://edirc.repec.org/data/eusavsk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.