Economic historians tend to explain US geographical development gaps in terms of industrialisation. But by the end of the 20th century, the richest counties had become specialised in services, rather than in manufacturing. This column evaluates how the service economy triggered this evident contrast between the urban and rural US. Market size causes localisation of non-agricultural activity, with the effect being stronger for services, especially knowledge services. Local policymakers can thus foster growth by attracting high-skilled workers to a region, with the multiplier effect eventually increasing the local market.
Alexandra Lopez-Cermeño, Sunday, July 12, 2015
Gianmarco I.P. Ottaviano, Giovanni Peri, Greg C. Wright, Wednesday, June 17, 2015
International trade in services and immigration are among the fastest growing aspects of globalisation. Using UK data, this column explores the links between these phenomena. Immigrants promote exports of final services to their home countries, while also reducing imports for some intermediate services, and bringing productivity gains to the labour market. In designing immigration policies, it is important that the potential impact on exports and offshoring activities are carefully considered.
Uri Dadush, Friday, March 13, 2015
Manufacturing is often seen as the key to sustainable export and productivity growth in developing countries. This column argues that, while manufacturing played a key role in some countries’ development, high growth can be sustained without relying primarily on manufacturing. A process of learning, productivity improvement, and investment that touches all sectors characterises the most successful economies. Policies that artificially favour manufacturing should instead give way to maximising learning from the frontier in all sectors of the economy.
Magnus Lodefalk, Friday, January 16, 2015
The manufacturing sector in OECD countries increasingly buys, produces, sells and exports services. This is now known as the servicification of manufacturing. This column, using firm-level data from Sweden, shows that as firms’ share of in-house services increases, so does their export intensity. The increasing complementarities between services and trade in goods thus imply that the different trade policies for goods and services are an antiquated divide.
Samuel Marden, Sunday, December 28, 2014
It is often argued that for poor countries, increases in agricultural productivity result in higher non-agricultural output, but the theory is ambiguous and the empirical evidence is limited. This column presents evidence from a natural experiment provided by China’s early 1980s agricultural reforms. Higher agricultural output induced by the reforms led to quantitatively important growth in non-agricultural output. This growth appears to be primarily due to rural savings increasing the supply of capital to the non-agricultural sector.
Giuseppe Berlingieri, Thursday, September 25, 2014
Advanced nations are shedding manufacturing jobs and gaining service jobs – a trend that has been in place for decades. Some of the shift, however, is a reclassification effect. Corporate outsourcing of tasks like marketing means workers doing the same task as before now show up as working for a firm in the service sector. Using US data from the past 60 years, this column shows that the evolution of the input-output structure – which is mostly due to professional and business services outsourcing – accounts for 36% of the increase in services and 25% of the fall in manufacturing.
Rafael Doménech, Mónica Correa-López, Sunday, August 10, 2014
Exporting goods requires services. This column discusses new evidence showing that the improvement in services regulations that took place over the 1990s and 2000s in Spain substantially increased the volume of exports of manufacturing firms, especially of large corporations.
Masayuki Morikawa, Sunday, July 20, 2014
Innovation is a key driver of productivity growth, but innovation in the service sector has received relatively little attention. This column shows that the total factor productivity gap between Japanese firms with and without innovations is larger in services than in manufacturing. Whereas the percentage of firms holding patents is much higher in manufacturing than in services, trade secrets are just as important in both sectors. These results suggest that the protection of trade secrets makes an important contribution to productivity growth.
Leonardo Iacovone, Aaditya Mattoo, Andrés Zahler, Sunday, September 15, 2013
Service exports and innovation may be a source of dynamic growth for countries in the middle-income trap. This column presents new research showing some support for this optimistic view. That said, it’s clear that researchers need to improve their understanding of how firms in the services sector innovate and increase productivity, and whether better-tailored policies can promote trade and innovation in services.
Barry Eichengreen, Poonam Gupta, Friday, January 18, 2013
Increasingly, services form a larger and larger share a country’s exports. Do exchange rates matter as much for services and they do for goods exports? This column argues that they do. Distinguishing between traditional services (such as trade and transport, tourism, financial services and insurance) and modern services (such as communications, computers, information services) suggests that the effect of the real exchange rate is especially large for exports of modern services.
Klaus Desmet, Ejaz Ghani, Stephen D O'Connell, Esteban Rossi-Hansberg , Wednesday, June 13, 2012
Will India’s rapid growth in the services sector lead to overcrowding of its cities? This column compares India’s experience to that of other countries.
Ejaz Ghani, Monday, January 23, 2012
Mention China and India to economists and their first thought will be rapid growth. Their second thought might be how differently the two economies are achieving this: China through manufacturing, India through services. This column asks whether that stereotype may be changing.
Federico Cingano, Guglielmo Barone, Tuesday, December 6, 2011
Many European countries face the challenge of credibly reducing their debt-to-GDP ratios. Boosting output growth is therefore an urgent and key political and economic priority. This column argues that increasing competition in the market for key upstream service activities – in particular, energy and professional services – could have sizeable effects on growth by improving the performance of downstream manufacturing industries.
Bernard Hoekman, Aaditya Mattoo, Friday, December 24, 2010
Trade in services is blighted by restrictive policy and is consequently one of the central issues in the Doha trade negotiations. Yet this column argues that even the best offers put forward are twice as restrictive as current policy and will generate no additional market openings. This column provides two proposals that aim to enhance the prospects of correcting this.
Jens Matthias Arnold, Beata Javorcik, Molly Lipscomb, Aaditya Mattoo, Tuesday, October 12, 2010
Conventional explanations for the post-1991 growth of India’s manufacturing sector focus on trade liberalisation and industrial de-licensing. This column examines 4,000 Indian firms from 1993 to 2005 and argues that a key factor for the success of Indian manufacturing may lie outside of manufacturing – in the services sector.
Ejaz Ghani, Thursday, February 25, 2010
Which is the best route to development: Manufacturing or services? This column argues that India’s example of a “services revolution” – rapid growth and poverty reduction led by services – provides inspiration for late-comers to development and challenges the conventional wisdom that industrialisation is the only rapid route to economic development.
Patrick A Messerlin, Erik van der Marel, Friday, July 31, 2009
Opening protected services markets would deliver large benefits to consumers – business, communication, and distribution services in the EC, US, and eight other economies represent almost one-third of world GDP. This column suggests the US and EC should launch transatlantic negotiations in services that would trigger plurilateral negotiations.
Stephen Broadberry, Bishnupriya Gupta, Friday, May 9, 2008
India stands out from other emerging economies because its growth has been led by the service sector rather than labour-intensive manufactures. This column summarises recent research showing that India has a long history of strength in services, and its service-led development may play to historical strengths rather than hindering its progress.