Special Issue on Service
Sector Productivity and the Productivity Paradox
Canadian Journal of Economics, Volume 32, No. 2 April/Avril 1999
Edited by Erwin W. Diewert, Alice Nakamura, and Andrew Sharpe
In the last 25 years, productivity growth has decelerated sharply in
all industrial countries, including Canada and the service sector has assumed
much greater importance in the economy. Lagging productivity growth has
occurred despite revolutionary advances in information technology. This
situation has been termed the productivity paradox as one might have expected
computers to have boasted productivity growth. The statistical system was
largely designed to capture developments in the goods sector so the growing
service sector may mean that our ability to adequately measure output and
productivity gains may be deteriorating. This may have lead to the underestimation
of productivity growth if there is a downward bias in the measurement of
service sector output.
In 1996, the Centre for the Study of Living Standards (CSLS) initiated
an international research project on service sector productivity and the
productivity paradox. The project brought together leading economists from
eight countries (Canada, the United States, the United Kingdom, France,
Germany, the Netherlands, Sweden, Norway) with the objective of shedding
light on the two related issues of service sector productivity measurement
and the productivity paradox. This special issue of the Canadian Journal
of Economics represents the outcome of the project. It contains revised
versions of paper presented at the conference, held on April 11-12, 1997
in Ottawa.
The papers are organized in four sections. The papers in the first part
lay out what is meant by the term productivity paradox. Papers in part
two examine computer-related measurement problems and the productivity
paradox while papers in part three look at whether new goods and retail
practices are at the heart of the productivity paradox. In part four, the
papers analyze other service sector productivity measurement problems in
such areas as insurance and banking as well as international comparisons
of service sector productivity levels. The papers confirm that there have
indeed been problems in the measurement of outputs, inputs, and prices
that have distorted official measures of productivity, but that these distortions
cannot account for the post-1973 productivity slowdown.
Erwin W. Diewert is Professor of Economics at the University of British
Columbia. Alice Nakamura is Winspear Professor in the Faculty of Business
at the University of Alberta. Andrew Sharpe is Executive Director of the
Centre for the Study of Living Standards in Ottawa.
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