The Rise of the Service Sector in the Global Economy

This chapter examines the implications of the rapid rise of the service sector in the global economy and sub-Saharan Africa. The chapter discusses the growing importance of the service sector and key issues such as service sector productivity, the contribution of the service sector to aggregate growth and productivity, and the potentially positive contributions of services to other sectors. The review touches upon key issues such as the Baumol hypothesis of a stagnant service sector. The second half of the chapter focuses on tertiarization trends in sub-Saharan Africa. The chapter finds robust evidence of relationships between development in services and manufacturing performance and evidence of strong inter-industry linkages between the service sector and manufacturing. Countries differ in terms of which specific service sectors matter for manufacturing performance. It is important for policymakers to take these trends into consideration in industrial policy design to achieve the optimal outcome from any such policy.