Survey of Productivity in the Service Sector

Author Name KATO Atsuyuki  (Fellow, RIETI)
Creation Date/NO. November 2007 07-P-005
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Amid the remarkable advance in the service-orientation of the economies of Organisation for Economic Co-operation and Development (OECD) nations in recent years there has been greater demand for studies on the effects of this on the macroeconomy and its implications for productivity dynamics and economic and industrial policies. Particularly since the revival of productivity in the United States in the latter half of the 1990s, one of the most important research issues in both Europe and Japan has become to elucidate its mechanism from the perspective of long-term economic growth strategy. To date, research has been conducted primarily on the basis of three issues: (1) the classification of concepts relating to services and the clarification of the targets of analysis, (2) the status and effects of the shift of economies toward service industries, and (3) factor analysis of growth in productivity. The findings of this research have been that the conventional perception of the service sector as being inferior to the manufacturing industry in terms of technical innovation, capital accumulation, and economy of scale is not necessarily appropriate; that there are large differences between countries and industries with regard to productivity dynamics; and that regulatory reforms to encourage competition and the effective use of information and communication technologies are important factors for achieving an increase in the rate of productivity growth.

In addition, there has been growing interest in globalization through outsourcing and FDI and in the role of flexible labor markets, and also in a more realistic definition and analysis of innovation as a growth engine. However, in spite of this recent growth in interest in service productivity there has not, as yet, been any great accumulation of research results, owing to factors such as limitations on the availability of data. In view of this we have not reached the stage at which systematic and clear policy implications can be determined. Accordingly, with regard to productivity in service sectors with all their varied aspects, in this paper I survey prior research results, principally of empirical research in Europe, the U.S., and Japan, I classify current research results and clarify the issues, and I consider the direction of future research.