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[IWS] ADB: THE SERVICE SECTOR IN ASIA: IS IT AN ENGINE OF GROWTH? [8 January 2013]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Asian Development Bank (ADB)
Working Paper Series No. 322
THE SERVICE SECTOR IN ASIA: IS IT AN ENGINE OF GROWTH? [8 January 2013]
by Donghyun Park and Kwanho Shin
[full-text, 35 pages]
Sustained rapid growth has moved developing Asia from the sidelines of the global economy to the front and center. The region has outperformed not only the maturing advanced economies but also other parts of the developing world, and continues to do so. An important by-product of the region’s stellar growth performance has been an unprecedented reduction in poverty.
Broadly speaking, economic growth comes from accumulation of productive factors and productivity growth. It is true that productivity growth has contributed substantially to developing Asia’s economic growth in the past. In particular, the reallocation of surplus rural workers from low-productivity agriculture to high-productivity manufacturing boosted economywide productivity and growth. However, much of Asia’s growth was also driven by factor accumulation. Favorable demographic trends led to a rapid growth of the labor force.
Going forward, a number of considerations suggest that the service sector will become a more important source of growth for Asia. For one, there is a well-established positive relationship between the share of services in GDP (or employment) and GDP per capita. The share of services is higher in richer countries than in poorer countries, and the share of services rises as a country’s GDP per capita rises over time. Many Asian countries are at or approaching income levels where the share of services tends to increase.
Based on the analysis of 12 Asian economies, the study finds that the service sector already contributed substantially to the region’s growth in the past. Further, services labor productivity grew at a healthy pace in most of the region. Overall, the analysis provides substantial cause for optimism about the role of the service sector as an engine of growth in Asia.
- Evolution of the Service Sector in Asian Economies Over Time
- Per Capita GDP and the Share of the Service Sector in GDP and Employment
- Can the Service Sector be an Engine of Growth for Asia?
- Concluding Observations
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