Local multipliers and the growth of services: evidence from late nineteenth century USA, Great Britain, and Sweden

Abstract

In the shadow of industry, the service sector substantially expanded during the late nineteenth century. This paper analyzes how the creation of industrial employment contributed to this growth of services. I leverage full-count census data from the United States, Great Britain, and Sweden to estimate local employment multipliers. I show that industrial growth was a key driver in the emergence of services. Each new industrial job created up to one additional local service job. This effect was driven by the high-skilled industrial sector where each additional job created up to two service jobs. Multiplier effects created jobs across different services.