IDEAS home Printed from https://ideas.repec.org/p/coe/wpbeer/9.html
   My bibliography  Save this paper

Analysing the Contribution of Business Services to European Economic Growth

Author

Listed:
  • Henk Kox

    (Centraal Planbureau (CPB), Government of the Netherlands)

  • Luis Rubalcaba

    (Departamento de Economía Aplicada, Facultad de Ciencias Económicas, Empresariales y Turismo, Universidad de Alcalá de Henares)

Abstract

The sector business services contributes directly and indirectly to aggregate economic growth in Europe. The direct contribution comes from the sector’s own dynamism. Though the business-services industry appears to be characterised by strong cyclical volatility, there was also a strong structural growth. Business services actually generated more than half of total net employment growth in the European Union since the second half of the 1990s. Apart from this direct growth contribution, the sector also contributed in an indirect way to economic growth by generating knowledge and productivity spill-overs for other industries. The knowledge role of business services is reflected in its employment characteristics. The business-services industry created spill-overs in three ways: original innovations, knowledge diffusion, and the reduction of human capital indivisibilities at firm level. The share of knowledge-intensive business services in the intermediate inputs of the total economy has risen sharply in the last decade. Firm-level scale diseconomies with regard to knowledge and skill inputs are reduced by external deliveries of such inputs, thereby exploiting positive external scale economies. The process goes along with an increasingly complex social division of labour between economic sectors. The European business-services industry itself is characterised by a relatively weak productivity growth. Does this contribute to growth stagnation tendencies à la the so-called “Baumol disease”? The paper argues that there is no reason to expect this as long as the productivity and growth spill-overs from business services to other sectors are large enough. Finally, the paper concludes by suggesting several policy elements that could boost the role of business services in European economic growth. This might to achieve some of the ambitious Lisbon goals with respect to employment, productivity and innovation.

Suggested Citation

  • Henk Kox & Luis Rubalcaba, 2007. "Analysing the Contribution of Business Services to European Economic Growth," Bruges European Economic Research Papers 9, European Economic Studies Department, College of Europe.
  • Handle: RePEc:coe:wpbeer:9
    as

    Download full text from publisher

    File URL: https://www.coleurope.eu/system/files_force/research-paper/beer9.pdf?download=1
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. José A. Camacho & Mercedes Rodriguez, 2007. "Integration and Diffusion of KIS for Industry Performance," Palgrave Macmillan Books, in: Luis Rubalcaba & Henk Kox (ed.), Business Services in European Economic Growth, chapter 7, pages 128-143, Palgrave Macmillan.
    2. Jacques De Bandt, 1999. "The Concept of Labour and Competence Requirements in a Service Economy," The Service Industries Journal, Taylor & Francis Journals, vol. 19(1), pages 1-17, January.
    3. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    4. Curtis Eaton, B. & Lipsey, Richard G., 1989. "Product differentiation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 12, pages 723-768, Elsevier.
    5. William B. Beyers & David P. Lindahl, 1996. "Explaining The Demand For Producer Services: Is Cost‐Driven Externalization The Major Factor?," Papers in Regional Science, Wiley Blackwell, vol. 75(3), pages 351-374, July.
    6. Michael C. Burda & Barbara Dluhosch, 2002. "Cost Competition, Fragmentation, and Globalization," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 424-441, August.
    7. Francesco Crespi, 2007. "IT Services and Productivity in European Industries," Palgrave Macmillan Books, in: Luis Rubalcaba & Henk Kox (ed.), Business Services in European Economic Growth, chapter 6, pages 116-127, Palgrave Macmillan.
    8. Neil M. Coe, 2000. "The Externalisation of Producer Services Debate: The UK Computer Services Sector," The Service Industries Journal, Taylor & Francis Journals, vol. 20(2), pages 64-81, April.
    9. Mattoo, Aaditya & Javorcik, Beata & Arnold, Jens, 2006. "Does Services Liberalization Benefit Manufacturing Firms?," CEPR Discussion Papers 5902, C.E.P.R. Discussion Papers.
    10. Luis Rubalcaba, 2007. "Services in European Policies," Bruges European Economic Policy Briefings 16, European Economic Studies Department, College of Europe.
    11. Harley L. Browning & Joachim Singelmann, 1978. "The Transformation of the U.S. Labor Force: The Interaction of Industry and Occupation," Politics & Society, , vol. 8(3-4), pages 481-509, September.
    12. Antonelli, Cristiano, 2001. "The Microeconomics of Technological Systems," OUP Catalogue, Oxford University Press, number 9780199245536.
    13. Kox, Henk L.M. & Rubalcaba, Luis, 2007. "Analysing the contribution of business services to European economic growth," MPRA Paper 2003, University Library of Munich, Germany.
    14. Michael Peneder & Karl Aiginger & Gernot Hutschenreiter & Markus Marterbauer, 2001. "Structural Change and Economic Growth," WIFO Studies, WIFO, number 20668, February.
    15. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    16. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    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. Henk Kox & Luis Rubalcaba, 2007. "Business services and the changing structure of European economic growth," CPB Memorandum 183, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Kox, Henk L.M. & Rubalcaba, Luis, 2007. "Business services and the changing structure of European economic growth," MPRA Paper 3750, University Library of Munich, Germany.
    3. Rinaldo Evangelista & Matteo Lucchese & Valentina Meliciani, 2013. "The contribution of Business services to the export performances of manufacturing industries. An empirical study on 5 European countries," Working Papers 14, Birkbeck Centre for Innovation Management Research, revised Nov 2013.
    4. Gábor Péli & Bart Nooteboom, 1997. "Simulation of Learning in Supply Partnerships," Computational and Mathematical Organization Theory, Springer, vol. 3(1), pages 43-66, March.
    5. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    6. Davide Arduini & Antonello Zanfei, 2012. "An overview of existing literature on public e-services," Working Papers 1214, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2012.
    7. Wai Woo, 2011. "Status and welfare under monopolistic competition," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 36(2), pages 227-239, February.
    8. Francesco Bogliacino & Matteo Lucchese & Mario Pianta, 2011. "Job creation in business services:Innovation, Demand, Polarisation," Working Papers 1107, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
    9. Yi Deng & Gabriel Picone, 2013. "Strategic Clustering and Competition by Alcohol Retailers: An Emperical Anlysis of Entry and Location Decisions," Working Papers 1013, University of South Florida, Department of Economics.
    10. Harald Trabold, 1994. "Technical Progress, Innovation and Product Differentiation in a Ricardian Trade Model with a Continuum of Goods," Discussion Papers of DIW Berlin 95, DIW Berlin, German Institute for Economic Research.
    11. BOYER, Marcel & MOREAUX, Michel & MAHENC, Philippe, 1995. "Entry Blockading Locations," Cahiers de recherche 9555, Universite de Montreal, Departement de sciences economiques.
    12. Chikako Yamauchi, 2010. "The availability of child care centers, perceived search costs and parental life satisfaction," Review of Economics of the Household, Springer, vol. 8(2), pages 231-253, June.
    13. Carayol, Nicolas & Roux, Pascale, 2005. "Self-organizing Innovation Networks: When do Small Worlds Emerge?," European Journal of Economic and Social Systems, Lavoisier, vol. 18(2), pages 307-332.
    14. Asplund, Marcus & Sandin, Rickard, 1999. "Competition in interrelated markets: An empirical study," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 353-369, April.
    15. Henk L.M. Kox, 2003. "Sources of structural growth in business services," Industrial Organization 0309004, University Library of Munich, Germany.
    16. Scarpetta, Stefano & Tressel, Thierry, 2004. "Boosting productivity via innovation and adoption of new technologies : any role for labor market institutions?," Social Protection Discussion Papers and Notes 29144, The World Bank.
    17. Manez, J.A. & Waterson, M., 2001. "Multiproduct Firms and Product Differentiation: a Survey," The Warwick Economics Research Paper Series (TWERPS) 594, University of Warwick, Department of Economics.
    18. Davide Castellani & Valentina Meliciani & Loredana Mirra, 2016. "The Determinants of Inward Foreign Direct Investment in Business Services across European Regions," Regional Studies, Taylor & Francis Journals, vol. 50(4), pages 671-691, April.
    19. Klos, Tomas B. & Nooteboom, Bart, 2001. "Agent-based computational transaction cost economics," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 503-526, March.
    20. Roberto Cellini & Luca Lambertini, 2004. "Private And Social Incentives Towards Investment In Product Differentiation," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 493-508.

    More about this item

    Keywords

    business services; structural change; growth; Europe; services;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L8 - Industrial Organization - - Industry Studies: Services
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • 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:coe:wpbeer:9. 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: Jessie Moerman (email available below). General contact details of provider: https://edirc.repec.org/data/eescebe.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.