Service Sector Productivity and Economic Growth in Asia

49 Pages Posted: 26 Jul 2014

See all articles by Jong-Wha Lee

Jong-Wha Lee

Korea University

Warwick J. McKibbin

Australian National University

Date Written: July 25, 2014

Abstract

This paper explores the impacts of more rapid growth in labor productivity in the service sector in Asia based on an empirical general equilibrium model. The model allows for input-output linkages and capital movements across industries and economies, and consumption and investment dynamics. We find that faster productivity growth in the service sector in Asia benefits all sectors eventually, and contributes to the sustained and balanced growth of Asian economies, but the dynamic adjustment is different across economies. This adjustment depends on the sectoral composition of each economy, the capital intensity of each sector, and the openness of each sector to international trade. In particular, during the adjustment to higher services productivity growth, there is a significant expansion of the durable manufacturing sector that is required to provide the capital stock that accompanies the higher aggregate economic growth rate.

Keywords: service sector, labor productivity, general equilibrium model, Asian economies

JEL Classification: J21, O11, O14, O41, O53

Suggested Citation

Lee, Jong-Wha and McKibbin, Warwick J., Service Sector Productivity and Economic Growth in Asia (July 25, 2014). ADBI Working Paper No. 490. Available at SSRN: https://ssrn.com/abstract=2471430 or http://dx.doi.org/10.2139/ssrn.2471430

Jong-Wha Lee (Contact Author)

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

Warwick J. McKibbin

Australian National University ( email )

Crawfrod School of Public Policy
Canberra, ACT 2600
Australia
02-61250301 (Phone)
02-62735575 (Fax)

HOME PAGE: http://www.sensiblepolicy.com

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