br Tertiarization economic determinants The residual concept

Tertiarization: economic determinants The residual concept of the service sector refers back to the classification of economic sectors. Fisher (1933) broke the economy into: (i) the primary sector, encompassing agriculture and livestock farming; (ii) the secondary sector, manufacturing and; (iii) the tertiary sector, which includes all remaining activities not classified in those two previous sectors. Later on, Clark (1940) started using the term “services” to encompass all activities included within the tertiary sector, and treated this cox 2 inhibitor sector as a complement of the others. According to Kon (2004), this latter definition has led to a distinct range of activities to be classified in the same category, which ranged from commerce and domestic services to health, education, as well as research and development activities. This heterogeneous set of activities included in the tertiary sector does not exhibit clearly shaped features. For this reason, the debate on the economic role of services has not yet been appropriately integrated into the realm of economic theory. Nevertheless, the term tertiary is still in use to designate all activities other than those within agricultural, livestock raising and manufacturing (Delgado, 2005). Therefore, the expanding tertiary sector has become recognized as tertiarization and was initially associated with a widened final demand for services, due to increased income and improvement in the living standards of populations. Such a situation would be a result of the high-income elasticity of demand as proposed by Fisher (1933) and Clark (1940). Although the increased demand for final services could have explained the expanding service sector, the consequences of this sectorial employment composition was not clear enough, which led Baumol (1967) to question one of the most intriguing aspects of this sector – its low productivity. For this author, the stagnant productivity of tertiary activities would account for the expanding employment in this sector, which needed more workers as compared to the other sectors in each period of their increasing productivity. As pointed out by Sánchez (2010), productivity differences between sectors and the effect of increased income were able to explain the growth of service sector until the 1980s, mainly in the developed economies. However, since then, requirements of a flexible production system have introduced new service demands. In this context, using services as production inputs for it and for the other two sectors, intermediary demand has increased. Consequently, the interaction and synergy between the secondary and tertiary sectors has been considered as a source of dynamism for modern economies (Illeris and Philippe, 1993; Greenhalgh and Gregory, 2001; Braibant, 2002; Siddiqui and Saleem, 2010). Although each of these explanations have evolved in a specific socioeconomic context aiming at understanding different moments of services expansion, it is possible to state that tertiarization is influenced by multiple trends acting simultaneously for their expansion (Weller, 2004). Summarizing the set of factors described, the three major economic dimensions related to the growth of services are defined as follows: (i) changes in final demand; (ii) productivity differences between sectors and; (iii) changes in intermediary demand (Schettkat and Yocarini, 2003; Wölfl, 2005; Sánchez, 2010). Further down, each of these dimensions is detailed.
Methodology Compatible data for this analysis are provided by OECD. The matrices for Brazil and United States (US) of 1995, 2000 and 2005 include 48 sectors, 18 out of which refer to services. However, as for Brazil and the US not all matrices for these sectors were available and this has required that matrices should be made compatible with 26 sectors and 10 out of which refer to services (Appendix A). OECD data were provided including currency of each country, i.e., real and dollar at current basic prices.