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Analysing the contribution of business services to European economic growth

Author

Listed:
  • Kox, Henk L.M.
  • Rubalcaba, Luis
Abstract
The sector business services contributes directly and indirectly to aggregate economic growth in Europe. The direct contribution comes from the sector’s own dynamism. Though the business-services industry appears to be characterised by strong cyclical volatility, there was also a strong structural growth. Business services actually generated more than half of total net employment growth in the European Union since the second half of the 1990s. Apart from this direct growth contribution, the sector also contributed in an indirect way to economic growth by generating knowledge and productivity spill-overs for other industries. The knowledge role of business services is reflected in its employment characteristics. The business-services industry created spill-overs in three ways: original innovations, knowledge diffusion, and the reduction of human capital indivisibilities at firm level. The share of knowledge-intensive business services in the intermediate inputs of the total economy has risen sharply in the last decade. Firm-level scale diseconomies with regard to knowledge and skill inputs are reduced by external deliveries of such inputs, thereby exploiting positive external scale economies. The process goes along with an increasingly complex social division of labour between economic sectors. The European business-services industry itself is characterised by a relatively weak productivity growth. Does this contribute to growth stagnation tendencies à la the so-called “Baumol disease”? The paper argues that there is no reason to expect this as long as the productivity and growth spill-overs from business services to other sectors are large enough. Finally, the paper concludes by suggesting several policy elements that could boost the role of business services in European economic growth. This might to achieve some of the ambitious Lisbon goals with respect to employment, productivity and innovation.

Suggested Citation

  • Kox, Henk L.M. & Rubalcaba, Luis, 2007. "Analysing the contribution of business services to European economic growth," MPRA Paper 2003, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2003
    as

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    References listed on IDEAS

    as
    1. José A. Camacho & Mercedes Rodriguez, 2007. "Integration and Diffusion of KIS for Industry Performance," Palgrave Macmillan Books, in: Luis Rubalcaba & Henk Kox (ed.), Business Services in European Economic Growth, chapter 7, pages 128-143, Palgrave Macmillan.
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    More about this item

    Keywords

    business services; structural change; economic growth; Europe; services; productivity;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L8 - Industrial Organization - - Industry Studies: Services

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