The purpose of this paper is to investigate empirically the relationship between demand fluctuations and productivity of service industries. Specifically, by using unique establishment-level data on service industries in Japan, this paper estimates production functions for six narrowly defined personal-service industries. In almost all the examined service industries, statistically and economically significant negative effects of demand variation on establishment-level productivity are found. This result suggests dispersing holidays may have positive effects on the productivity of service industries.
Published: Masayuki Morikawa, 2012. "Demand Fluctuations and Productivity of Service Industries," Economics Letters, Vol. 117(1), pp. 256-258.