The service sector and economic development

The author's initial observation is that alongside the accelerating increase in the weight of the service sector in the macroeconomic structure of the developed countries, there has been a still more important transformation of the sector's internal structure. This transformation can largely explain the new characteristics of the sector. The problems of measurement of the service sector make it worthwhile to approach its productivity by indirect means. The article augments the traditional indices of labour and all-factor productivity with indices of factor application, and argues from this that there has been an alteration in the effect of productivity on this sector, which is changing rapidly in its structure, its factor-application indices and its role in the economy. The author sets out to illuminate the structural transformation in terms of change in the demand for services. Breaking down total demand for services into its constituents (intermediate use, final use, investment and exports) shows that the structure of demand has shifted away from final use towards intermediate use and investment.