13 Measuring Final Product Services for International Comparisons

Services, as distinct from commodities, have been the focus of great interest in recent years. In large part this interest is the result of the apparent growing importance of services in the economic life of nations. This, in turn, could be either because the demand for services is income elastic and, as national economies have developed over time, their real incomes have risen or because of an independent secular increase in service activity relative to commodity activity in national economies, possibly for supply-side reasons. Certainly, it is commonly believed that nations ' productive activity involves services more now than in the past, as measured both by the proportion of the labor force producing services and by the proportion of total output that takes the form of services. No attempt is made here to explain different patterns of production of national outputs. Rather, this paper examines the output aspect of services in present-day economies, in both structural and secular terms. In what follows, all attention is directed atfinal product output, and at comparative quantities of services relative to commodities produced and consumed in a wide variety of nations. The presentation will be divided between a discussion of the problems of measurement of services in an international context and a description of the empirical results derived from a combined cross-section and time-series analysis of service-commodity output composition. The nature of the evidence in this analysis bears more on intercountry comparisons than on intertemporal ones. That is, more reliable statistical ligh