Inter-industries productivity gap and the services employment dynamics

by Jula, Dorin and Jula, Nicoleta  
Published in Romanian Journal of Economic Forecasting, volume 8 issue2, 2007.

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The dynamics of employment in final services depends on a set of economic, social and cultural factors. On the other hand, the increase in the population incomes (and the influence of some national factors) leads to an increase in the demand for services. However, the relatively poor productivity (Baumol, Blackman and Wolff, 1989) also determines the increase in prices, this evolution leading to a decrease in the demand for services. In the paper, the conditions in which the effect induced by the demand-income elasticity over the dynamics of the services surpasses the substitution effect generated by the demand-price elasticity are analyzed so that the growth rate of the production in the service sector is higher than the growth rate of the productivity in the same sector. From the different evolution of the two variables results the long-term growth of the share of employment in services in the total employment at the national level.

Keywords: Labor productivity, employment, services, price elasticity and income elasticity of demand for services
JEL Classification: J21, L80, O40.