TABLE 1.1 K ey Characteristics of Services Have Distinguished Them from Manufactured Goods in Their Implications for Productivity and Jobs, but These Are Changing with the Advent of Digital Technologies Sectors’ key characteristics and their implications for productivity and jobs
Implications
Key characteristics
Sectors and effects
Market size and location (What is produced and for whom?)
Ability to leverage labor with capital and technology (How do firms operate?)
Linkages (With whom do firms operate?)
Manufacturing
Storable, transferable, tradable goods so production can be separated from consumption
Amenable to mechanization
Inputs into other manufactured goods
Analog services (pre-ICT)
Simultaneity of production and consumption
Inherent role for labor
Important enablers for goods-producing sectors
Labor-augmenting potential
Expanded roles for economywide enabling services
Digitally Reduced need for proximity enhanced services
Productivity
Scale
Innovation
Spillovers
Jobs (number, skill mix)
Number of jobs
Skill mix demanded
Multipliers that boost job creation and skill mix
Source: Summary based on chapter 1. Note: Arrows indicate which of the three key characteristics contribute to scale, innovation, and spillovers. ICT = information and communication technology.
Firms in the services sector are also innovating more than before. The increase in research and development (R&D) since the 1990s has been largely concentrated within ICT multinationals through software patents (Branstetter, Glennon, and Jensen 2018). When innovation is defined to take forms other than R&D—including management techniques, organizational practices, marketing procedures, and adoption of existing technologies—the share of innovating firms is relatively similar across manufacturing and services in most countries (Pires, Sarkar, and Carvalho 2008). Based on data from six LMICs, Nayyar, Cruz, and Zhu (2018) classify both information technology (IT) services and the manufacture of electronics as “high” in their extent of product and process innovation.18 The diffusion of ICT and related intangible capital is also expanding the ability of services firms to innovate (as further discussed in chapter 3). Spillovers from growing linkages with other sectors. The share of services in world gross exports has remained about 20 percent since 1980. In terms of value added, however, services accounted for 43 percent of world exports in 2009, rising from 31 percent in 1980. In fact, more than two-thirds of the growth in services value added in exports between 1995 and 2011 was due to an increase in services embodied in other exports 16
At Your Service? The Promise of Services-Led Development
