Analyzing the role of service sector on productivity growth across European regions

Service industries play a core role in advanced economies, both from a quantitative a strategic point of view. Traditionally, productivity has been introduced as explaining factor of tertiarization processes in developed economies, while it has been simultaneously assessed that services display lower productivity levels and growth rates than other economic industries. Such a statement is supported initially on the personal nature of many service activities, which makes it difficult to substitute the work for capital and the introduction of technical progress. Nevertheless in recent years many papers and authors have refuted or limited this conventional thesis. This paper focuses on the impact of tertiarization on overall productivity growth at regional level. It departs from the analysis of a sample of regions belonging to 16 European countries (EU-15 except Luxembourg, plus Norway and Switzerland) to show the relationship between structural changes, tertiarization and productivity growth at this level. Data has been extracted from Regional Databases elaborated by Cambridge Econometrics and OECD. The main result is that several service industries have shown dynamic productivity growth rates, contributing more than expected to productivity growth. Lately, a data panel model highlights some additional aspects disaggregating by market and non market services.