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The rise of the “service economy” in the second half of the twentieth century and its energetic contingencies

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  • Ulrich Witt

    (Max Planck Institute for Science of Human History
    Griffith University)

  • Christian Gross

    (Ministry of Justice & Consumer Protection)

Abstract

The characteristic of the “service economy” is the rise to dominance of the service sector in terms of employment and value added shares. We track this rise during the second half of the twentieth century for the U.S., more precisely the period from 1970 to 2005. Following seminal work by Baumol (1967) the rise is often attributed to growing productivity differentials between the economic sectors. The causes of the productivity differentials are, however, controversial. Inspired by Georgescu-Roegen’s (1971) evolutionary approach to production theory, the present paper explores whether differences in the energetic features of the sectors’ production technologies contribute to the growing sectorial productivity differentials. For the data for our period of analysis it turns out that a close relationship indeed exists between the sectors’ incentives for substituting relatively cheap energy for ever more expensive labor and their labor productivity gains. In highly energy-dependent sectors an increasing energy/labor ratio has been driving productivity growth while this was not the case in the service sector. The paper closes with a short discussion of what the finding may imply for the future of the service economy.

Suggested Citation

  • Ulrich Witt & Christian Gross, 2020. "The rise of the “service economy” in the second half of the twentieth century and its energetic contingencies," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 231-246, April.
    • Handle: RePEc:spr:joevec:v:30:y:2020:i:2:d:10.1007_s00191-019-00649-4
    DOI: 10.1007/s00191-019-00649-4
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    More about this item

    Keywords

    Service economy; Sectorial change; Productivity growth; Energy; Employment;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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