Growth of the Service Sector and Economic Fluctuations:A Production Network Perspective
According to Victor Fuchs(1968),the cyclical fluctuations in output and employment in the industrial sector are larger than those in the service sector.This implies that as the proportion of the service sector increases,the cyclical fluctuations of the overall economy will tend to decrease,which has been confirmed by the performance of the real economy.Why does the growth of the service sector lead to a reduction in economic fluctuations?This paper intends to explore this issue from the perspective of production networks.Theoretically,we propose a general equilibrium model with a production network to understand the mechanism by which the growth of the service sector affects economic fluctuations,and develop two interrelated theoretical hypotheses.First,when the elasticities of substitution between primary inputs and intermediate inputs are greater than those between different intermediate inputs,lower sparsity of production networks will lead to smaller economic fluctuations.Second,a rising proportion of the service sector will cause declining sparsity of production networks,via an increase in the shares of primary inputs and final consumption,with the former reflecting the growing role of the service sector as a user of pri-mary inputs and the latter reflecting the increased role of the service sector as a provider of final goods.Empirically,we employ nearly 30 years of global input-output data to conduct empirical tests based on a simultane-ous equation econometric model.The benchmark regression results show that a 10％increase in the proportions of pri-mary inputs and final consumption in the service sector will reduce production network sparsity by 0.42％-1.34％,while a 10％reduction in production network sparsity will result in a decrease of 0.79-1.56 units in economic fluctuations.This suggests that the growth of the service sector with rises in the proportions of primary inputs and final consumption can lower production network linkage sparsity,and thus iron out economic fluctuations.This basic conclusion remains valid after a series of endogeneity and robustness tests.A counterfactual analysis for China indicates that if the service sector share,intermediate input share,and service productivity volatility in China are replaced with those in the USA,re-spectively,China's aggregate economic fluctuations would experience varying degrees of decrease.However,changing the service sector share and the Intermed,ate input share contribute more(69.8％and 73.6％).This study has significant policy implications.In China,the current service sector share in the national economy is significantly lower than that of developed market economies,which not only hinders the optimization and upgrading of economic and industrial structures but also constrains the further development of Chinese overall economy.As this re-search shows,the backwardness of the service sector also leads to an increase in the sparsity of production networks,fur-ther resulting in larger economic fluctuations.Substantial economic fluctuations not only raise the cost of structural ad-justments and worsen expectations for sustainable economic growth but also generate global spillover effects through ex-ternal economic and trade channels,thus exacerbating the external development environment.Conversely,we can reduce the sparsity of production networks and smooth out significant economic fluctuations by increasing the primary input share(or employment)and the final consumption share of the service sector.Therefore,it is both urgent and strategically profound to take active measures to promote the comprehensive development of the service sector.First,we should properly handle the relationship among economic growth,structural changes,and economic fluctua-tions.It is crucial to continuously optimize the structure and reduce economic fluctuations in the process of economic de-velopment and growth.Second,we should take effective measures to promote the healthy,efficient,and sustained development of the ser-vice sector.These include improving the institutional mechanisms of the service sector,breaking administrative monopo-lies,fostering market competition,balancing the development of different service sectors,as well as adapting to the global trend of service liberalization,and becoming a contributor to multilateral rules in service trade.Third,we should correctly deal with the relationship between the service sector and other sectors,especially the manufacturing sector.It is necessary to improve the development quality and efficiency of the service sector,so as to bet-ter serve the high-quality development of the manufacturing sector and shape a congenial development pattern,which can ultimately enhance the resilience and security level of the industrial and supply chains.Lastly,we should leverage the framework or perspective of economic networks to comprehend the impact of the growth of the service sector on economic fluctuations.It is imperative to contextualize the development of the service sec-tor within the broader framework of overall economic development both domestically and internationally,rather than con-sidering it in isolation.The economic networks should not be confined to a single country but extend their reach on a global scale.Only in this way can domestic service enterprises grow bigger and get stronger to consolidate the micro foundation of the service sector development.
Growth of the Service SectorEconomic FluctuationsProduction Network
万方数据
维普
