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Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?

Author

Listed:
  • Maja Bacovic

    (Faculty of Economics, Department for Economic Analysis and Quantitative Economics)

  • Zivko Andrijasevic

    (University of Montenegro, Faculty of Philosophy, Department for History)

  • Julija Cerovic Smolovic

    (Faculty of Economics, Department for Economic Analysis and Quantitative Economics)

Abstract

Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor? We explored the patterns of structural changes in Europe and found growing relevance of the service sector, particularly knowledge-intensive services. The study shows that labour productivity and TFP growth were lower in the service sector than in the goods sector but were higher in knowledge-intensive services than in other services. GDP per capita growth is positively related to the output’s share of knowledge-intensive services as well as GDP growth and TFP growth in high-income countries, but not in medium-income economies. This might be explained by the rapid growth in the earlier stages of development in less-deve¬loped countries and its subsequent slowdown. Although knowledge-intensive services are the fastest growing sector in all countries, industry is still the most relevant sector for long-term growth, with the highest TFP and labour productivity growth. The growing knowledge-intensive services sector, with its higher TFP growth than other services, partially overcomes the negative effects of expansion of the service sector on long-term output growth. This study shows that R&D investment growth leads to significantly higher output growth in knowledge-intensive services than in other sectors, which may be used as a relevant policy tool.

Suggested Citation

  • Maja Bacovic & Zivko Andrijasevic & Julija Cerovic Smolovic, 2022. "Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(2), pages 124-143, February.
    • Handle: RePEc:sav:journl:v:70:y:2022:i:2:p:124-143
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    References listed on IDEAS

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    More about this item

    Keywords

    structural changes; output growth; labour productivity; TFP; knowledge-intensive services;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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