Working Paper: NBER ID: w0486
Authors: Victor R. Fuchs
Abstract: The distribution of employment among Agriculture, Industry, and Service within countries is closely related to the level of real Gross Domestic Product per capita. As real income rises, Agriculture's share falls, Service employment rises, and Industry’s share rises to a peak at about $3,300 (1970 dollars) per capita and then declines. U.S. time series and OECD cross-sections follow almost identical patterns of employment change. The decline of Agriculture is attributable primarily to differences in income elasticity of demand but the shift from Industry to Service is attributable primarily to differential rates of growth of output per worker. Economic growth also contributes to the rise of service employment through an increase in female labor force participation because families with working wives tend to spend a higher proportion of their income on services. Productivity tends to grow less rapidly in the Service sector than in the rest of the economy, but the shift of employment to Services was not a major factor in the slowing of aggregate productivity in the United States in the 1970's.
Keywords: economic growth; service employment; labor force participation
JEL Codes: J21; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic growth (real GDP per capita) (O49) | share of employment in agriculture falls (J43) |
| economic growth (real GDP per capita) (O49) | share of employment in services rises (J68) |
| decline of agriculture's share of employment (J43) | differences in income elasticity of demand (D12) |
| differential rates of growth of output per worker (O40) | shift from industry to services (O14) |
| economic growth (O49) | female labor force participation increases (J21) |
| female labor force participation increases (J21) | demand for services rises (J23) |