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Economic Growth and the Rise of Service Employment

  • Victor R. Fuchs

The distribution of employment among Agriculture, Industry, and Service within countries is closely related to the level of real Gross Domestic Product per capita. As real income rises, Agriculture's share falls, Service employment rises, and Industry’s share rises to a peak at about $3,300 (1970 dollars) per capita and then declines. U.S. time series and OECD cross-sections follow almost identical patterns of employment change. The decline of Agriculture is attributable primarily to differences in income elasticity of demand but the shift from Industry to Service is attributable primarily to differential rates of growth of output per worker. Economic growth also contributes to the rise of service employment through an increase in female labor force participation because families with working wives tend to spend a higher proportion of their income on services. Productivity tends to grow less rapidly in the Service sector than in the rest of the economy, but the shift of employment to Services was not a major factor in the slowing of aggregate productivity in the United States in the 1970's.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0486.

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Date of creation: Jun 1980
Date of revision:
Publication status: published as Fuchs, Victor R. "Economic Growth and the Rise of Service Employment." Towards an Explanation of Economic Growth, edited by Herbert Giersch, pp. 221-2 52. Tubingen, West Germany: J.C.B. Mohr (Paul Siebeck), 1981.
Handle: RePEc:nbr:nberwo:0486
Note: LS
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  1. Kravis, Irving B & Heston, Alan W & Summers, Robert, 1978. "Real GDP per Capita for More Than One Hundred Countries," Economic Journal, Royal Economic Society, vol. 88(350), pages 215-42, June.
  2. Jacob Mincer, 1962. "Labor Force Participation of Married Women: A Study of Labor Supply," NBER Chapters, in: Aspects of Labor Economics, pages 63-105 National Bureau of Economic Research, Inc.
  3. Michael Grossman & Victor R. Fuchs, 1973. "Intersectoral Shifts and Aggregate Productivity Change," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 2, number 3, pages 227-243 National Bureau of Economic Research, Inc.
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