Ronald Schettkat and Giovanni Russo
Giovanni Russo and Laura Chies
The service industries have grown to absorb between two-thirds and three-quarters of total employment in advanced economies. The service industries combine great employment growth with limited productivity growth, prompting a policy dilemma, the affordability of services. After reviewing the recent literature on the shift towards the services, in spite of unfavorable relative price changes, and the role of rising income effects, this chapter presents the input-output framework for service productivity analysis and uses it to analyze the externalizations of in-house services to the market place by firms and households, which are called outsourcing and tertiarization, respectively. The chapter also discusses service growth factors other than demand and supply forces, namely institutional factors, offshoring and trade.