Lagging Productivity Growth in the Service Sector: Mismeasurement, Mismanagement or Misinformation?
While the service sector has been growing rapidly as a share of total output, aggregate productivity growth has generally lagged behind that of the goods sector. In this report, the author assesses a range of explanations for lagging service sector productivity growth. Measurement problems appear to be greater in services than in goods, and a detailed analysis of output measurement in the three service industries experiencing the lowest productivity growth suggests that underestimation is likely significant in finance, insurance and real estate, in community, business and personal services, and in trade. A lower level of competition in services compared with goods may also have affected productivity growth, though this impact is very hard to quantify. Explanations based on the service sector's relatively greater investment in new technology, however, are found to account at best for lagging productivity growth only in the last decade. Finally, the hypothesis that service industries are incapable of high productivity growth because of their labour-intensive nature is shown to be inapplicable to much of the service sector. The report concludes by considering which service industries are showing the greatest growth. It is found that much of the increased service-sector output has been in areas that have shown relatively strong productivity growth, or where problems of measurement are particularly severe. Moreover, there is considerable potential for greater productivity growth in areas that may have shown slower productivity increases in the past, because of such factors as technological change and ongoing adjustments to past deregulation.
|Date of creation:||1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
- Francois, Joseph & Reinert, Kenneth A, 1995. "The Role of Services in the Structure of Production and Trade: Stylized Facts from a Cross-Country Analysis," CEPR Discussion Papers 1228, C.E.P.R. Discussion Papers.
- Zvi Griliches, 1998.
"Productivity, R&D, and the Data Constraint,"
in: R&D and Productivity: The Econometric Evidence, pages 347-374
National Bureau of Economic Research, Inc.
- David, P.A., 1989. "Computer And Dynamo: The Modern Productivity Paradox In A Not-Too Distant Mirror," The Warwick Economics Research Paper Series (TWERPS) 339, University of Warwick, Department of Economics.
- Durand, Rene, 1994. "An Alternative to Double Deflation for Measuring Real Industry Value-Added," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 40(3), pages 303-16, September.
- Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, July.
- Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:97-6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.