Is growth declining in the service economy?

Abstract

This study extends Baumol's (1967) two-sector (manufacturing and services) unbalanced growth model to analyze a situation in which, first, services are used for both final consumption and intermediate inputs in manufacturing production, and second, the productivity of the manufacturing and services sectors endogenously evolves. Using this model, we investigate how the employment share of services and economic growth rate evolve through time. Our results are summarized as follows. First, if the human capital accumulation function exhibits constant returns to scale with respect to per capita consumption of services, then we obtain a U-shaped relationship between the employment share of services and the economic growth rate. Second, if the human capital accumulation function exhibits decreasing returns to scale with respect to per capita consumption of services, the economic growth rate decreases at first, begins to increase after some time, decreases again, and finally, approaches zero.

How Indonesia Economics Works: Correlation Analysis of Macroeconomics in 2010 - 2019

“…Then, the influence on employment will also be balanced by the existence of a remuneration system, as well as the development of environmental aspects (Ioan, 2014). The study is complemented by research (i.e., Kim et al, 2019;Soto, 2009;Sasaki, 2015), which states that a link between economic growth and employment can be realized when the factor of education, fiscal policy (Doménech et al, 2018), and the balance between job seekers based on gender can be realized ideally. This is also recognized by improving the quality of services and the effect of dollarization on state policy.…”

Sources of Productivity Growth Dynamics: Is Japan Suffering From Baumol's Growth Disease?

“…By way of a Japanese example, Morikawa (2014aMorikawa ( ,2016 shows that services firms have fewer product innovations than do manufacturing firms, while in Japan, firms in the services sector conducting innovation activities record much higher productivity than those not conducting them. The second indication is derived from the theoretical explanation by Oulton (2001) and Sasaki (2015) that the high growth rate at the aggregate level can be realized because of the role of services as an intermediate input into industry and final consumption. These roles have productivity growth-enhancing effects, as well as preventing the aggregate labor productivity growth rate from monotonically decreasing.…”