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Aggregate Employment and the Rise of Services across Time and Countries

Author

Listed:
  • Margarida Duarte
  • Diego Restuccia

Abstract

We study the sectoral reallocation of employment over time and across countries, with a focus on the rise of services. We document substantial changes in the ratio of aggregate employment to working-age population across countries that are not systematically related to productivity growth or income levels, yet tightly linked to the rise in services employment. We assess the quantitative contribution of changes in aggregate employment to the rise of services using an otherwise standard model of sectoral reallocation calibrated to time-series for the United States. The calibrated model implies a high elasticity of changes in aggregate employment to services: a one percentage point change in aggregate employment generates on average a 0.7 percentage point change in services employment. The implication is that actual changes in aggregate employment account for one-third of the rise in services, on average across countries, and up to one-half in countries with sustained employment increases.

Suggested Citation

  • Margarida Duarte & Diego Restuccia, 2026. "Aggregate Employment and the Rise of Services across Time and Countries," Working Papers tecipa-817, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-817
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    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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