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Technology Shocks, the Service Sector and Economic Growth

Listed author(s):
  • Mitra Thakur, Gogol

Advances in ICTs as well as financial developments have greatly increased the scope for joint utilisation of various industrial goods and services. For example, consumption of many durable goods like telecommunication equipment (e.g. mobile sets), various electronic products, computer hardware and automobiles leads to joint purchases of services such as telecommunications, software services, insurance and other financial services. In this paper, we propose a specification for demand interlinkage between industry and the service sector, indicative of such developments, wherein final demand for service not only depends on industrial output but also on the relative price of service. This specification implies that a labour productivity increase in the service sector, say due to adoption of ICTs, can generate enough demand to increase both the growth rate in the economy and the relative size of the service sector if demand for service per unit industrial output is sufficiently elastic with respect to its relative price.

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File URL: https://mpra.ub.uni-muenchen.de/73364/1/MPRA_paper_73364.pdf
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File URL: https://mpra.ub.uni-muenchen.de/74004/1/MPRA_paper_74004.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 73364.

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Date of creation: 21 Jul 2016
Date of revision: 27 Aug 2016
Handle: RePEc:pra:mprapa:73364
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  1. Barry Eichengreen & Poonam Gupta, 2013. "The two waves of service-sector growth," Oxford Economic Papers, Oxford University Press, vol. 65(1), pages 96-123, January.
  2. Oulton, Nicholas, 2001. "Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 605-627, October.
  3. Sasaki, Hiroaki, 2012. "Endogenous phase switch in Baumol's service paradox model," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 25-35.
  4. Robert Rowthorn & Ramana Ramaswamy, 1999. "Growth, Trade, and Deindustrialization," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 1-2.
  5. Pugno, Maurizio, 2006. "The service paradox and endogenous economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 17(1), pages 99-115, January.
  6. Sasaki, Hiroaki, 2007. "The rise of service employment and its impact on aggregate productivity growth," Structural Change and Economic Dynamics, Elsevier, vol. 18(4), pages 438-459, December.
  7. A. P. Thirlwall, 2002. "The Nature of Economic Growth," Books, Edward Elgar Publishing, number 2579.
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