Productivity in Services: an International Comparative Perspective

Relatively little work has been done on international comparisons of service productivity. This is partly because of the complexity of the measurement problems. Also, service productivity is strongly affected by the institutional organization, the legal framework and cultural preferences within each country. There is a need, however, to get a clearer picture of the comparative productivity performance of service industries. Firstly, services account for an increasing share of economic activity. In 1995, the average output share of services for OECD countries was about 70 per cent of total GDP, though there are substantial differences among countries. The United States (US) had the highest service output share, at over 80 per cent of total GDP in 1994. In Germany the service output share was only 65 per cent in 1995, and it was more highly concentrated in financial and business services.' Secondly, international trade in producer services is rising rapidly. Because of this, the comparative productivity performance of service industries directly affects the trade balance of nations. A third reason is that services have become increasingly integrated with industrial activity. As a result, even when some particular service is not traded, higher productivity of service producers can play a role in increasing a country's world market share in industrial products. The integration of industrial and service activities is partly caused by the outsourcing choices of industrial enterprises and partly by the rise of new business activities. In practice, a much greater share of the labour force is associated with the production of the final output of industrial products than would appear to be the case from just counting those who are employed by manufacturing establishments. This paper deals with measurement of productivity differentials in services for five countries: namely Canada, France, Germany,2 the Netherlands and the US. Estimates of levels of output and productivity relative to the US are obtained for

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