Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?

Year, pages: 2022, 124 - 143

We explored the patterns of structural changes in Europe and found growing relevance of the service sector, particularly knowledge-intensive services. The study shows that labour productivity and TFP growth were lower in the service sector than in the goods sector but were higher in knowledge-intensive services than in other services. GDP per capita growth is positively related to the output’s share of knowledge-intensive services as well as GDP growth and TFP growth in high-income countries, but not in medium-income economies. This might be explained by the rapid growth in the earlier stages of development in less-deve¬loped countries and its subsequent slowdown. Although knowledge-intensive services are the fastest growing sector in all countries, industry is still the most relevant sector for long-term growth, with the highest TFP and labour productivity growth. The growing knowledge-intensive services sector, with its higher TFP growth than other services, partially overcomes the negative effects of expansion of the service sector on long-term output growth. This study shows that R&D investment growth leads to significantly higher output growth in knowledge-intensive services than in other sectors, which may be used as a relevant policy tool.

Bacovic, M., Andrijasevic, Z., Cerovic Smolovic, J. 2022. Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?. In Ekonomický časopis/Journal of Economics, vol. 70, no.2, pp. 124-143. 0013-3035. DOI: https://doi.org/10.31577/ekoncas.2022.02.02

Bacovic, M., Andrijasevic, Z., Cerovic Smolovic, J. (2022). Structural Changes and Growth in Europe: Are Knowledge-intensive Services Changing Paradigm of Expansion of Services as a Long-term Growth-diminishing Factor?. Ekonomický časopis/Journal of Economics, 70(2), 124-143. 0013-3035. DOI: https://doi.org/10.31577/ekoncas.2022.02.02

Publisher: Ekonomický ústav SAV