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Growth of business services: A supply-side hypothesis

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  • Satya P. Das
  • Anuradha Saha

Abstract

This paper aims to explain why and how the service sector may grow faster than manufacturing. It develops a two-sector, closed-economy model, having a manufacturing sector and a service sector. Accumulation of human capital serves as the basis of growth. The analysis focuses on business services, while household services are also considered. It is argued that differences in returns to scale between the two sectors and employment frictions in manufacturing explain why the growth rate of the service sector may be higher. The model also features that within the service sector the business services sub-sector may grow faster than household services.

Suggested Citation

  • Satya P. Das & Anuradha Saha, 2015. "Growth of business services: A supply-side hypothesis," Canadian Journal of Economics, Canadian Economics Association, vol. 48(1), pages 83-109, February.
    • Handle: RePEc:cje:issued:v:48:y:2015:i:1:p:83-109
    DOI: 10.1111/caje.12120
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    2. Bradford, Scott C. & Das, Satya & Saha, Anuradha, 2022. "Country size, per-capita income, and comparative advantage: services versus manufacturing," MPRA Paper 115091, University Library of Munich, Germany.
    3. Senjuti Gupta & Bidisha Chakraborty & Tanmoyee Banerjee (Chatterjee), 2019. "Service Good as an Intermediate Input and Optimal Government Policy in an Endogenous Growth Model," South Asian Journal of Macroeconomics and Public Finance, , vol. 8(1), pages 57-91, June.

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    JEL classification:

    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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