The service industry makes up more than 57%2) of the total annual value added in Korea and provides almost 70% of the jobs of the economy. While a portion of the industry is growing continuously, in terms of labor productivity, the productivity of the service sector has continued to decline, and it is only 47% compared to that of the manufacturing industry. Therefore, we must seek methods for increasing the productivity of the service industry from various aspects.However, the service industry, as far as the government is primarily concerned, only includes medical, cultural contents, tourism and leisure, social services and business services industries. Thus, policies directed toward the personal services industry have not been well established. These industries have some common characteristics, such as having poor domestic markets and a low entry barrier due to not requiring high expertise. Thus, the main problem of this kind of industry is the service sector productivity decline due to excess entry.In general, excess entry is assumed as the cause of the low productivity in the industries. Therefore, as a solution, introducing entry limit regulations has been discussed as policy alternatives for regulation. However, we would like to show that the dynamics of entry and exit act differently in each industry, and that it is possible for active entry and exit to perform a positive function of improving productivity of the industry. To this end, we analyze what impacts entry and exit of each livelihood type personal service industry have on productivity.Intrinsic differences may exist between productivity growth mechanisms in manufacturing and service industries. In terms of manufacturing, R&D and/or technological innovation have been regarded as the main factors of increasing productivity.In the case of service industries, entry and exit can be major factors in improving productivity. This is because the entry of highly productive establishments and the exit of low productive establishments can play roles to enhance productivity in the industries.This study defined the five service industries as the livelihood type personal service industries, and analyzed productivity changes over entry and exit by each service industry. Since employment and productivity differ markedly from industry to industry, it is necessary to analyze by industry.Data for the analysis were obtained from the 2005 Census and the 2010 economic services Census of the KOSTAT (Services division). We made a panel data set by connecting the two databases in the establishment level. Thus, we can separate the entry and exit establishments during the 2005 and 2010 period. We used the labor productivity as sales divided by the number of the employees
