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Productivity, Innovation and Knowledge in Services

New Economic and Socio-Economic Approaches

Edited by Jean Gadrey and Faïz Gallouj

Written by some of the most distinguished authors in the field, this book elucidates the critical and complex relationships between services, production and innovation. The authors discuss the limitations of current theories to explain service productivity and innovation, and call for a conceptual re-working of the ways in which these are measured. They also highlight the important role of knowledge in the production system and in doing so make an important contribution to a key debate which has emerged in the social sciences in recent years.
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Chapter 1: How Stagnant are Services?

Edward N. Wolff


Edward N. Wolff Traditional measures of productivity growth show very low gains made by service industries since 1979 in the United States. However, other indices of ‘technological activity’, such as computerization, show that service industries have actually been more technologically active than goods-producing industries over this period. Wolff (1991) called attention to this inconsistency in the case of the insurance industry. This chapter will investigate different indicators of technological activity among goods producers and services. Moreover, it will try to shed some light on this apparent paradox. As shown in Table 1.1, on the basis of US Bureau of Economic Analysis data on output, labour input and capital stock, conventionally measured total factor productivity (TFP) growth in stagnant services has been virtually zero in the USA since 1979 – indeed, negative, for several service industries (see the Data Appendix for information on measuring TFP). On the other hand, services have invested much more heavily in computerization than goodsproducing industries (about triple since 1977). The educational attainment of the workforce and other skill indices are greater in services than goods producers over this period. Moreover, the degree of change in the occupational composition of employment has been almost as great among service industries as in goods industries since 1970. The first part of the chapter will summarize the underlying ‘cost disease’ model of the service sector. The next two parts will include descriptive statistics on various indicators of technological activity in service and goods industries over the 1947–97 period in the...

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