Already in 1940 the U.S. became a so called “service economy” meaning that more than half of its work force is employed in producing intangibles. By 1975 two thirds of the work force was part of the tertiary sector. The Tertiary Sector, also known as the Service Sector, has become the number one driving force of the U.S. economy during the last decades. According to recent statistics (2002) it nowadays accounts for 78% of the U.S. non-agricultural employment and 76% of the U.S. private sector Gross Domestic Product (GDP). Additionally, the U.S. is the world’s premier services exporter (17% of worldwide services trade) and importer (14% of worldwide services trade) at the same time. These figures alone necessitate a closer look. However, scientist even predict a continuous increase in the relevance of this industry for the U.S. Economy, expecting that almost 100% of additionally created jobs during the next decade will belong to the Service Sector.
This development is even more impressive considering the fact that the Service Sector was a subject almost not worth mentioning in the eyes of scientists up to the 1940s. Adam Smith stated in the 18th century, that services were “unproductive of any value because they do not fix or realize themselves in any permanent subject or vendible commodity which endures after labor is passed”. Another term used for the Tertiary Sector expresses very well the attitude toward this sector: The Residuum Sector, with the residual being the “unproductive labor”. Up to that point in history the merchandise producing industry, the trade of goods – nationally and internationally – and the market’s mechanisms and their expected development in future were the sole focus of economists.
The questions are which factors have lead to the impressive growth of this industry and what will the future hold for it?
This seminar paper will provide a glance at some of the numerous factors, namely the specialization of labor, growth of final demand and growth of goods-producing industries, and will than focus on the development and significance of the Information and Communication Technology for the U.S. service sector.
However, at the beginning the term “service” will be defined and some of its different understandings explained.
Table of Contents
A) Introduction
B) The U.S. Service Sector
I. Definition of Service
II. Growth in Services
1. Specialization of Labor
2. Growth of Final Demand
3. Growth of Goods-Producing Industries
III. International Trade of U.S. Services
1. Tradability of Services
2. Forms of International Trade of Services
3. Tradable Services and ICT
4. ICT as a Tradable Good
5. Gains from International Trade in Services
IV. Influences of ICT on the U.S. Service Economy
1. Productivity
2. Outsourcing
3. Broader Markets
C) Conclusion
Objectives and Core Topics
This paper examines the evolution and current significance of the U.S. service sector, specifically focusing on the catalysts for its growth and the transformative role of Information and Communication Technology (ICT) in international trade.
- The historical shift of the U.S. toward a service-based economy.
- Economic drivers including labor specialization and final demand growth.
- The classification and tradability of diverse service categories.
- The impact of ICT on productivity, outsourcing, and market expansion.
- The dual role of ICT as both a facilitator of service trade and a tradable product itself.
Excerpt from the Book
1. Tradability of Services
The heterogenous group of services may be divided according to different perspectives. One of these is the division according to the tradability of services.
The first group consists of usually not-tradable, location-bound services which Dunning divides into six sub-groups: - those of which the sales are dependent upon the presence of people, goods or other services which are located in the country of use - transportation facilities - telecommunication and public utility services - warehousing, wholesaling and retailing services, including repair and maintenance service - most forms of public administration, social and community related services - services which require a face-to-face contact between buyer and seller.
Moreover, the transaction costs of some services such as consultancy and professional services may be too high to be traded efficiently.
Summary of Chapters
A) Introduction: This chapter provides an overview of the U.S. transition into a "service economy" and highlights the growing dominance of the tertiary sector in employment and GDP.
B) The U.S. Service Sector: This chapter explores the conceptual difficulties in defining services and identifies major drivers of sector growth, such as labor specialization and changing consumer demand.
III. International Trade of U.S. Services: This section investigates the mechanics of service exports, distinguishing between cross-border trade and sales through foreign affiliates, while emphasizing the role of ICT.
IV. Influences of ICT on the U.S. Service Economy: This chapter analyzes how technology has boosted productivity, enabled the global outsourcing of tasks, and allowed companies to serve broader international markets.
C) Conclusion: The conclusion summarizes that while the growth of the service sector is driven by multifaceted factors, ICT remains the key enabler for further global market expansion and the tradability of previously immobile services.
Keywords
Service Sector, U.S. Economy, International Trade, ICT, Information and Communication Technology, Labor Specialization, Final Demand, Productivity, Outsourcing, Tradability, Cross-Border Trade, Foreign Affiliates, Tertiary Sector, Global Markets.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper explores the structural growth of the U.S. service sector and analyzes how ICT has redefined the way services are traded and managed internationally.
What are the central thematic areas covered in the text?
The central themes include the historical growth of the service industry, the definitions and classification of service types, the impact of ICT on service trade, and the economic benefits of internationalization.
What is the main objective of the author?
The main objective is to identify the factors that led to the impressive expansion of the U.S. service sector and to explain the fundamental role that technology plays in sustaining this growth.
Which scientific approach does the author use?
The author employs a literature-based analysis, synthesizing existing economic theories and statistical data to describe the transition from a goods-producing to a service-based economy.
What is the significance of the main body of the work?
The main body focuses on the mechanics of trade, demonstrating how services have evolved from local, face-to-face activities into tradable commodities through the integration of digital technology.
Which keywords best characterize the study?
The study is characterized by terms such as Service Sector, International Trade, ICT, Outsourcing, Productivity, and Tradability.
How does the author define a "service" in the context of this paper?
The author broadly defines a service as an economic activity that adds value either directly to another economic unit or to a good belonging to another economic unit.
What does the paper conclude about the future of the U.S. service sector?
The paper concludes that while local market saturation may pose risks, the continued development of ICT and its role in increasing the tradability of services offer significant opportunities for further growth.
- Quote paper
- Dipl.-Kfm. Carsten Reuter (Author), 2005, The U.S. Service Sector - International Trade of Services and the Information and Communication Technology (ICT), Munich, GRIN Verlag, https://www.grin.com/document/50089
