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Table of Contents
Front Cover
Contents
Foreword
Preface
Acknowledgments
About the Authors
Abbreviations
1 Of Goods and Services: Inside the Black Box
Introduction
Services, Jobs, and Economic Transformation
Scale, Innovation, Spillovers, and Job Creation: Revisiting the "Uniqueness" of Manufacturing
The Services Sector Is Not Monolithic
Implications for Inclusion in Lower-Income Countries
Conclusion
Annex 1A Classifications of Economic Activities in the Services Sector
Annex 1B Adapting the McMillan-Rodrik Decomposition to Show Sectoral Reallocation
Annex 1C Estimating Kaldor's Laws for the Industry Sector, 1995-2018
Notes
References
2 Productivity and Jobs in Services: Mind the Gaps
Introduction
Services Firms and Their Productivity: Eight Stylized Facts
Implications for Productivity Growth
Implications for Job Creation
Conclusion
Annex 2A Data Sources
Annex 2B Alternative Measures of Scale
Notes
References
Spotlight: Bringing Services to the Surface: The Measurement Challenge
Introduction
Measuring Outputs
Measuring Inputs
Estimating Productivity
Measuring Trade
A Fading Border between Manufacturing and Services
Measurement of Digital Services
Data Coverage and Access
The Way Forward
Notes
References
3 Will Technology Make the Twain Meet? A Changing Productivity-Jobs Dichotomy in Services
Introduction
Reduced Dependence on Physical Proximity
Increased Role of Automation
The Rise of Intangible Capital
Implications for Productivity Growth and Job Creation
Conclusion
Notes
References
4 Look Before You Leap: Services Before Manufacturing?
Introduction
Services and Value Chain Upgrading in Industrialized Countries
Services Growth without a Manufacturing Core.
Growing Importance of Services to a Manufacturing Core
The Role of Linkages in Expanding Inclusion
Conclusion
Notes
References
5 Boosting Productivity to Keep Up the Good Work: Policy Imperatives
Introduction
The Policy Agenda: Trade, Technology, Training, and Targeting (the 4Ts)
Where Countries Stand in the 4Ts Space
Effects of Variations in Technology and Intersectoral Linkages' Trends across Subsectors on Prioritization in the 4Ts across Countries
The Way Forward: How to Improve the 4Ts
Conclusion
Notes
References
6 Conclusion: In the Service of Development?
Introduction
The Promise of Services-Led Development
A Data Agenda for Services
Appendix A. Summary Measures for Trade, Technology, Training, and Targeting (the 4Ts)
Boxes
Box 1.1 Trade in Services: A Tale of Four Modes
Box 2.1 Informality in the Services Sector
Box 2.2 COVID-19's Impact on the Services Sector
Box 3.1 Technological Change and the Rising Demand for Services
Box 3.2 AI, Jobs, and the Demand for Skills in India's ICT Services Sector
Box 3.3 Impact of COVID-19 on Digitalization and Remote Delivery
Box 4.1 The Philippines' Emergence in the Offshore Services Industry
Box 4.2 Pakistan's ICT Services Boom
Box 4.3 Geography, Transportation Services, and the Emergence of Logistics Hubs
Box 5.1 Scaling Up Food Services Retail: The Role of Foreign Direct Investment
Box 5.2 Beyond Border Restrictions: How Domestic Regulations Affect Potential for Competitiveness
Box 5.3 India's Software Revolution and the 4Ts
Figures
Figure 1.1 Much of the Decline in Agriculture's Share of Employment and GDP in LMICs since the 1990s Has Been Offset by Services
Figure 1.2 Consistently across Regions, Services Have Offset Much of Agriculture's Decline in Share of Employment and GDP in LMICs since the 1990s.
Figure 1.3 Labor Productivity in Services Has Increased Consistently in LMICs since the 1990s
Figure 1.4 Labor Productivity Growth in Services Has Matched That in Manufacturing across LMICs in Many Regions since the 1990s, Typically Exceeding That of HICs
Figure 1.5 Among LMICs in Most Regions, Services Have Contributed More Than Industry to Aggregate Labor Productivity Growth since the 1990s
Figure 1.6 Services Subsectors Vary in Their Scope for Scale, Innovation, Spillovers, and Low-Skill Jobs
Figure 1.7 The Most Prominent Mode of Exporting Services Is Establishing "Commercial Presence" Abroad, but "Cross-Border Supply" and "Consumption Abroad" Matter for Some Subsectors
Figure 1.8 The Skill Intensity, Capital Intensity, Intersectoral Linkage Intensity, and Trade Intensity across Services Subsectors Has Not Changed Dramatically over Time
Figure 1.9 The Export and Skill Intensity of Services Subsectors in HICs Are Higher Than in LMICs
Figure 1.10 In LMICs, Commerce, Hospitality, and Transportation Services Rely More on Unskilled Labor, While Financial and Business Services Rely More on Skilled Labor
Figure 1.11 Lower-Income Countries See More Employment in Low-Skill Services, While Higher-Income Countries See More in Global Innovator Services and Skill-Intensive Social Services
Figure 1.12 The Inverse Relationship between Low-Skill Services and Per Capita Income Is Driven by Retail Trade
Figure 1.13 Much of the Increase in the Services Sector's Share of Employment in LMICs since the 1990s Is Attributable to Low-Skill Services
Figure 1.14 Low-Skill Services Are More Likely Than Global Innovator Services to Employ Informal Workers
Figure 1.15 The Shares of Female Workers in Low-Skill Commerce and Hospitality Services-and in Global Innovator Services-Typically Exceed the Share in Manufacturing.
Figure 1.16 The Share of Firms with Majority Female Ownership Is Highest in Low-Skill Retail Services, Especially in the Informal Sector
Figure 1.17 Labor Productivity Gaps between Lower- and High-Income Countries Tend to Be Wider among Low-Skill Personal, Commerce, and Hospitality Services Compared with Global Innovator Services and Manufacturing
Figure 1.18 The Shares of Jobs and Wages in Business Services Exports Exceed Those in Manufactured Goods' Exports in Many Large LMICs
Figure 2.1 Labor Productivity and TFP Vary across Services Subsectors, with Global Innovators Being the Most Productive
Figure 2.2 Within Services Subsectors, Productivity Is More Varied across More Narrowly Defined Industries
Figure 2.3 Industry and Firm Characteristics Explain about Half the Variation in Labor Productivity
Figure 2.4 Services Firms Are Smaller Than Manufacturing Firms across All Income Groups
Figure 2.5 Commerce and Business Establishments Are the Smallest, While the Average ICT and Manufacturing Establishments Are Close in Size
Figure B2.1.1 Most Informal Enterprises Operate in Retail Services
Figure B2.1.2 The Importance of Informality in Services Relative to Manufacturing Is Most Pronounced When Comparing Shares of Employment and Value Added
Figure 2.6 When Data Are Restricted to Formal Firms, Services Firms Are Smaller Than Manufacturing Firms, on Average, in Both LMICs and HICs
Figure 2.7 In Services, Smaller Firms Contribute More to Employment and Value Added Than in Manufacturing, but Large Services Firms Still Contribute Significantly
Figure 2.8 Especially in HICs, Small Services Firms Are Just as Productive as Large Ones
Figure 2.9 In HICs, the Productivity Benefit of Scaling Up Is Smaller in Services Than in Manufacturing, but in LMICs, Some Services Subsectors Benefit More Than Manufacturing.
Figure 2.10 With Few Exceptions, Services Rely Less Than Industry on Physical Capital
Figure 2.11 Dispersion in Labor Productivity Is Higher in Services Than in Manufacturing
Figure 2.12 Employment Growth during a Firm's Initial Years Tends to Be Lower in Services Than in Manufacturing
Figure 2.13 Productivity Growth of Services Firms Is Similar to That of Manufacturing Firms
Figure 2.14 Entry and Exit Play a Larger Role in Job Creation and Destruction in the Services Sector Than in Manufacturing
Figure 2.15 Among Services Firms, Employment Changes Are Driven More by Entry and Exit Than by Firms' Growth
Figure 2.16 In Industries with Lower Capital Intensity, Entry Plays a Larger Role in Job Creation
Figure 2.17 Within-Firm, Between-Firm, and Entry and Exit Are Important Drivers of Productivity Growth in Both Services and Manufacturing
Figure B2.2.1 Firm Surveys Show That Accommodation, Food Services, and Education Have Been the Hardest-Hit Sectors during the COVID-19 Pandemic
Figure B2.2.2 Household Surveys Show That, on Average, 38 Percent of Services Workers Stopped Working in 2020
Figure 2.18 In Commerce-Related Services, US Firms Have More Establishments per Firm Than Brazilian Firms
Figure 2.19 Services Are More Likely Than Manufacturers to Be Intensive in ICT Capital
Figure 2.20 More Productive Services Rely More on Linkages with Other Firms
Figure 2.21 In Low-Income Countries, Most of the Services Jobs Are in Lower-Productivity Subsectors
Figure 2.22 Just As in Manufacturing, Firm-Level Productivity in Services Is Closely Related to Wages
Figure 2.23 Commerce and Hospitality Workers in LMICs Are More Likely to Be in the Lowest Wage Quartile, While Half of Financial and Business Services Workers Are in the Highest Wage Quartile.
Figure 2.24 In LMICs, Job Quality Is the Highest in Public Administration, Utilities, and Financial and Business Services.
Contents
Foreword
Preface
Acknowledgments
About the Authors
Abbreviations
1 Of Goods and Services: Inside the Black Box
Introduction
Services, Jobs, and Economic Transformation
Scale, Innovation, Spillovers, and Job Creation: Revisiting the "Uniqueness" of Manufacturing
The Services Sector Is Not Monolithic
Implications for Inclusion in Lower-Income Countries
Conclusion
Annex 1A Classifications of Economic Activities in the Services Sector
Annex 1B Adapting the McMillan-Rodrik Decomposition to Show Sectoral Reallocation
Annex 1C Estimating Kaldor's Laws for the Industry Sector, 1995-2018
Notes
References
2 Productivity and Jobs in Services: Mind the Gaps
Introduction
Services Firms and Their Productivity: Eight Stylized Facts
Implications for Productivity Growth
Implications for Job Creation
Conclusion
Annex 2A Data Sources
Annex 2B Alternative Measures of Scale
Notes
References
Spotlight: Bringing Services to the Surface: The Measurement Challenge
Introduction
Measuring Outputs
Measuring Inputs
Estimating Productivity
Measuring Trade
A Fading Border between Manufacturing and Services
Measurement of Digital Services
Data Coverage and Access
The Way Forward
Notes
References
3 Will Technology Make the Twain Meet? A Changing Productivity-Jobs Dichotomy in Services
Introduction
Reduced Dependence on Physical Proximity
Increased Role of Automation
The Rise of Intangible Capital
Implications for Productivity Growth and Job Creation
Conclusion
Notes
References
4 Look Before You Leap: Services Before Manufacturing?
Introduction
Services and Value Chain Upgrading in Industrialized Countries
Services Growth without a Manufacturing Core.
Growing Importance of Services to a Manufacturing Core
The Role of Linkages in Expanding Inclusion
Conclusion
Notes
References
5 Boosting Productivity to Keep Up the Good Work: Policy Imperatives
Introduction
The Policy Agenda: Trade, Technology, Training, and Targeting (the 4Ts)
Where Countries Stand in the 4Ts Space
Effects of Variations in Technology and Intersectoral Linkages' Trends across Subsectors on Prioritization in the 4Ts across Countries
The Way Forward: How to Improve the 4Ts
Conclusion
Notes
References
6 Conclusion: In the Service of Development?
Introduction
The Promise of Services-Led Development
A Data Agenda for Services
Appendix A. Summary Measures for Trade, Technology, Training, and Targeting (the 4Ts)
Boxes
Box 1.1 Trade in Services: A Tale of Four Modes
Box 2.1 Informality in the Services Sector
Box 2.2 COVID-19's Impact on the Services Sector
Box 3.1 Technological Change and the Rising Demand for Services
Box 3.2 AI, Jobs, and the Demand for Skills in India's ICT Services Sector
Box 3.3 Impact of COVID-19 on Digitalization and Remote Delivery
Box 4.1 The Philippines' Emergence in the Offshore Services Industry
Box 4.2 Pakistan's ICT Services Boom
Box 4.3 Geography, Transportation Services, and the Emergence of Logistics Hubs
Box 5.1 Scaling Up Food Services Retail: The Role of Foreign Direct Investment
Box 5.2 Beyond Border Restrictions: How Domestic Regulations Affect Potential for Competitiveness
Box 5.3 India's Software Revolution and the 4Ts
Figures
Figure 1.1 Much of the Decline in Agriculture's Share of Employment and GDP in LMICs since the 1990s Has Been Offset by Services
Figure 1.2 Consistently across Regions, Services Have Offset Much of Agriculture's Decline in Share of Employment and GDP in LMICs since the 1990s.
Figure 1.3 Labor Productivity in Services Has Increased Consistently in LMICs since the 1990s
Figure 1.4 Labor Productivity Growth in Services Has Matched That in Manufacturing across LMICs in Many Regions since the 1990s, Typically Exceeding That of HICs
Figure 1.5 Among LMICs in Most Regions, Services Have Contributed More Than Industry to Aggregate Labor Productivity Growth since the 1990s
Figure 1.6 Services Subsectors Vary in Their Scope for Scale, Innovation, Spillovers, and Low-Skill Jobs
Figure 1.7 The Most Prominent Mode of Exporting Services Is Establishing "Commercial Presence" Abroad, but "Cross-Border Supply" and "Consumption Abroad" Matter for Some Subsectors
Figure 1.8 The Skill Intensity, Capital Intensity, Intersectoral Linkage Intensity, and Trade Intensity across Services Subsectors Has Not Changed Dramatically over Time
Figure 1.9 The Export and Skill Intensity of Services Subsectors in HICs Are Higher Than in LMICs
Figure 1.10 In LMICs, Commerce, Hospitality, and Transportation Services Rely More on Unskilled Labor, While Financial and Business Services Rely More on Skilled Labor
Figure 1.11 Lower-Income Countries See More Employment in Low-Skill Services, While Higher-Income Countries See More in Global Innovator Services and Skill-Intensive Social Services
Figure 1.12 The Inverse Relationship between Low-Skill Services and Per Capita Income Is Driven by Retail Trade
Figure 1.13 Much of the Increase in the Services Sector's Share of Employment in LMICs since the 1990s Is Attributable to Low-Skill Services
Figure 1.14 Low-Skill Services Are More Likely Than Global Innovator Services to Employ Informal Workers
Figure 1.15 The Shares of Female Workers in Low-Skill Commerce and Hospitality Services-and in Global Innovator Services-Typically Exceed the Share in Manufacturing.
Figure 1.16 The Share of Firms with Majority Female Ownership Is Highest in Low-Skill Retail Services, Especially in the Informal Sector
Figure 1.17 Labor Productivity Gaps between Lower- and High-Income Countries Tend to Be Wider among Low-Skill Personal, Commerce, and Hospitality Services Compared with Global Innovator Services and Manufacturing
Figure 1.18 The Shares of Jobs and Wages in Business Services Exports Exceed Those in Manufactured Goods' Exports in Many Large LMICs
Figure 2.1 Labor Productivity and TFP Vary across Services Subsectors, with Global Innovators Being the Most Productive
Figure 2.2 Within Services Subsectors, Productivity Is More Varied across More Narrowly Defined Industries
Figure 2.3 Industry and Firm Characteristics Explain about Half the Variation in Labor Productivity
Figure 2.4 Services Firms Are Smaller Than Manufacturing Firms across All Income Groups
Figure 2.5 Commerce and Business Establishments Are the Smallest, While the Average ICT and Manufacturing Establishments Are Close in Size
Figure B2.1.1 Most Informal Enterprises Operate in Retail Services
Figure B2.1.2 The Importance of Informality in Services Relative to Manufacturing Is Most Pronounced When Comparing Shares of Employment and Value Added
Figure 2.6 When Data Are Restricted to Formal Firms, Services Firms Are Smaller Than Manufacturing Firms, on Average, in Both LMICs and HICs
Figure 2.7 In Services, Smaller Firms Contribute More to Employment and Value Added Than in Manufacturing, but Large Services Firms Still Contribute Significantly
Figure 2.8 Especially in HICs, Small Services Firms Are Just as Productive as Large Ones
Figure 2.9 In HICs, the Productivity Benefit of Scaling Up Is Smaller in Services Than in Manufacturing, but in LMICs, Some Services Subsectors Benefit More Than Manufacturing.
Figure 2.10 With Few Exceptions, Services Rely Less Than Industry on Physical Capital
Figure 2.11 Dispersion in Labor Productivity Is Higher in Services Than in Manufacturing
Figure 2.12 Employment Growth during a Firm's Initial Years Tends to Be Lower in Services Than in Manufacturing
Figure 2.13 Productivity Growth of Services Firms Is Similar to That of Manufacturing Firms
Figure 2.14 Entry and Exit Play a Larger Role in Job Creation and Destruction in the Services Sector Than in Manufacturing
Figure 2.15 Among Services Firms, Employment Changes Are Driven More by Entry and Exit Than by Firms' Growth
Figure 2.16 In Industries with Lower Capital Intensity, Entry Plays a Larger Role in Job Creation
Figure 2.17 Within-Firm, Between-Firm, and Entry and Exit Are Important Drivers of Productivity Growth in Both Services and Manufacturing
Figure B2.2.1 Firm Surveys Show That Accommodation, Food Services, and Education Have Been the Hardest-Hit Sectors during the COVID-19 Pandemic
Figure B2.2.2 Household Surveys Show That, on Average, 38 Percent of Services Workers Stopped Working in 2020
Figure 2.18 In Commerce-Related Services, US Firms Have More Establishments per Firm Than Brazilian Firms
Figure 2.19 Services Are More Likely Than Manufacturers to Be Intensive in ICT Capital
Figure 2.20 More Productive Services Rely More on Linkages with Other Firms
Figure 2.21 In Low-Income Countries, Most of the Services Jobs Are in Lower-Productivity Subsectors
Figure 2.22 Just As in Manufacturing, Firm-Level Productivity in Services Is Closely Related to Wages
Figure 2.23 Commerce and Hospitality Workers in LMICs Are More Likely to Be in the Lowest Wage Quartile, While Half of Financial and Business Services Workers Are in the Highest Wage Quartile.
Figure 2.24 In LMICs, Job Quality Is the Highest in Public Administration, Utilities, and Financial and Business Services.