Growth and productivity in the service sector: The state of the art

Literature on growth accounting has generally introduced productivity to explain the growth of services. One of the most conventional statements in economics, with regard to the services sector suggests that, as a whole, this sector has a lower productivity level than the other productive sectors, and that its growth is always quite slow. Such a statement is based initially on the personal nature of many services, which makes it difficult to substitute the work for capital factor and the incorporation of technical progress. From this approach we can derive the relative lower productivity in some advanced economies (such as the European countries versus the United States and some particular emergent economies) as an explanation of the growth of the tertiary sector. In this working paper, we will look in greater depth at issues related to services productivity, from conceptual aspects regarding the definition and meaning of productivity, to methodological and measurement of services productivity. This paper is essentially a necessary state of the art of relationships between economic growth and productivity within services sector, reviewing not only the conventional literature but also those new waves of thinking.