Growth in the Service Sector

Abstract

As Solow (1977) put it, ‘There is an awful lot of GDP that is neither manufacturing nor primary production’. In fact, in the classification of sectors generally adopted in national accounts, all production other than those which clearly belong to the agricultural (or primary) and industrial sectors is put into the service sector. When goods are put into the service sector on the negative criterion that they do not belong to the commodity producing sectors, one of the main characteristics distinguishing them from other goods is that of intangibility. Another related characteristic is that they are generally not storable, for example, they cannot be embodied in investment or durable consumer goods which can serve for a long period; it is for this reason that the classical economists considered the hiring of labour by the landlord class as ‘unproductive consumption’. Another consequence is that they are not generally the subject of trade between countries, and are treated as non-tradables; in fact, however, they enter into international trade in some forms.