Is growth declining in the service economy?

Hiroaki Sasaki

Structural Change and Economic Dynamics, 2020, vol. 53, issue C, 26-38

Abstract: This study extends (Baumol, 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, we obtain an S-shaped relationship between the employment share of services and the economic growth rate: the economic growth rate decreases at first, begins to increase after some time, decreases again, and finally, approaches zero.

Keywords: Service economy; Economic growth; Endogenous productivity growth; Business services (search for similar items in EconPapers)
JEL-codes: J21 J24 O11 O14 O30 O41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Is Growth Declining in the Service Economy? (2015)
Working Paper: Is Growth Declining in the Service Economy? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:53:y:2020:i:c:p:26-38

DOI: 10.1016/j.strueco.2020.01.004

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