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Producer Services and Manufacturing Productivity: Evidence from Japan Industrial Productivity Database

  • Kiyoyasu Tanaka

As service sectors account for a growing share of economic activity in advanced economies, economists claim that the quality and cost of producer services supplied by the service sectors are crucial in supporting the competitiveness of manufacturing firms. This paper provides an empirical assessment on this argument by exploring a link between service-sector performance and manufacturing productivity in Japan for the period 1980-2005. Assuming that an improvement in producer services is measured with errors by a price deflator growth of service outputs, I propose an estimation framework in which an observed productivity depends partly on the performance of service sectors weighted by service-input intensities. Robust to a wide range of specifications and alternative indicators of services upgrading, I find little evidence that the service sectors contributed to productivity growth of the manufacturing sector. Thus, my findings do not support the claim that the upgrading of producer services improves manufacturing competitiveness.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-076.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-076.

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Date of creation: Jul 2009
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Handle: RePEc:hst:ghsdps:gd09-076
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  1. Sanghoon Ahn & Kyoji Fukao & Keiko Ito, 2008. "Outsourcing in East Asia and its impact on the Japanese and Korean Labour Markets," OECD Trade Policy Papers 65, OECD Publishing.
  2. Görg, Holger & Hanley, Aoife, 2004. "Does Outsourcing Increase Profitability?," IZA Discussion Papers 1372, Institute for the Study of Labor (IZA).
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  4. Karsten Bjerring Olsen, 2006. "Productivity Impacts of Offshoring and Outsourcing: A Review," OECD Science, Technology and Industry Working Papers 2006/1, OECD Publishing.
  5. Arnold, Jens Matthias & Mattoo, Aaditya & Narciso, Gaia, 2006. "Services inputs and firm productivity in Sub-Saharan Africa : evidence from firm-level data," Policy Research Working Paper Series 4048, The World Bank.
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  7. Hoekman, Bernard & Mattoo, Aaditya, 2008. "Services trade and growth," Policy Research Working Paper Series 4461, The World Bank.
  8. Oulton, Nicholas, 2001. "Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 605-27, October.
  9. Sourafel Girma & Holger Görg, 2003. "Outsourcing, Foreign Ownership and Productivity: Evidence from UK Establishment Level Data," Discussion Papers of DIW Berlin 361, DIW Berlin, German Institute for Economic Research.
  10. Donald Siegel & Zvi Griliches, 1992. "Purchased Services, Outsourcing, Computers, and Productivity in Manufacturing," NBER Chapters, in: Output Measurement in the Service Sectors, pages 429-460 National Bureau of Economic Research, Inc.
  11. Francois, Joseph F, 1990. "Producer Services, Scale, and the Division of Labor," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 715-29, October.
  12. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
  13. Ten Raa, T. & Wolff, E.N., 2000. "Outsourcing of Services and the Productivity Recovery in U.S. Manufacturing in the 1980s and 1990s," Discussion Paper 2000-32, Tilburg University, Center for Economic Research.
  14. Fernandes, Ana M. & Paunov, Caroline, 2008. "Foreign direct investment in services and manufacturing productivity growth: evidence for Chile," Policy Research Working Paper Series 4730, The World Bank.
  15. Kazuyuki Motohashi, 2003. "Firm level analysis of information network use and productivity in Japan," Discussion papers 03021, Research Institute of Economy, Trade and Industry (RIETI).
  16. Arnold, Jens & Javorcik, Beata S. & Mattoo, Aaditya, 2007. "Does services liberalization benefit manufacturing firms ? Evidence from the Czech Republic," Policy Research Working Paper Series 4109, The World Bank.
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