Growth of Service Industries

Problems arise if budgets for services are under constant budgetary pressure. The authors argue that budget is linked to demand and therefore price increases would seem to threaten the very existence of these services. The puzzle for economists is that services do not become more costly because their provision is less efficient. The service sectors of advanced economies are surprisingly vigorous-the employment of an ever increasing share of the labour force is one phenomenon. The paradox of these services is that in spite of their exploding costs, demand persists. Policymakers struggle with the problematic question of whether to limit public service budgets as costs for their provision rise. Economists are perplexed by the interplay of slow service and fast goods productivity growth and wonder why the demand for services is so persistent. The text is intended for use by both policy makers and economists and serves as a useful introduction to service productivity analysis.