Do services play a role in regional productivity growth across Europe?

Abstract

The relationship between economic structure and productivity growth has been a subject of increasing interest over recent decades. The innovative focus of this paper concerns the role of the service sector in this relationship at a regional level. Traditionally, productivity has been introduced as explaining factor of tertiarization processes in advanced economies, while it has been simultaneously assessed that services display lower productivity levels and growth rates than other economic industries. Nevertheless, in recent years many papers and authors have refuted or limited these conventional theses. This paper focuses on the impact of tertiarization on overall productivity growth, using a sample of European NUTS-2 regions in the period between 1980 and 2008. The results partially refute traditional knowledge on the productivity of services. Contrary to what conventional theories suggest, this research demonstrates that several tertiary activities have shown dynamic productivity growth rates, while their contribution to overall productivity growth plays a more important role than was historically believed.