No. 290 - The growth of the service sector and demand for services

In this paper I present evidence about the importance of demand for services in the development of the service sector. By comparing developments in demand for services in Italy, France, Germany and the US, I show that the contribution of final demand by European households to growth in output is less than that made by US households. In Europe, the share of output produced by market services and utilized by the manufacturing sector is almost twice as high as the average value recorded in the US. The manufacturing sector, however, tends to consume services requiring low-skilled workers such as distribution services and inland transportation. Compared with European countries, the higher growth rate of market services in the US (and of services requiring highly-skilled workers) is then due to higher demand by US households.