Manufacturing-led development has been the traditional model for creating jobs and prosperity. But in the past three decades, the services sector has grown faster than the manufacturing sector in many developing economies. In 2019, the services sector accounted for an average of 55 percent of GDP and 45 percent of employment in developing economies. As manufacturing’s share of economies across the development spectrum recedes, can the services sector help low- and middle-income countries catch up with high-income countries, while expanding good job opportunities? At Your Service? The Promise of Services-Led Development assesses the prospects for services-led development. Its findings and their implications are encouraging for the World Bank Group’s “better jobs for more people” Jobs and Economic Transformation agenda.
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The book finds that the services sector is increasingly driving economic transformation, despite policymakers’ focus on manufacturing. “Half of workers in low- and middle-income countries are currently employed in the services sector and they have become more productive since the 1990s, enabling income gains,” says Gaurav Nayyar, Senior Economist with the Equitable Growth, Finance, and Institutions Vice-Presidency and co-author of the book.
“This services-driven economic transformation is possible because of new opportunities for scale, innovation and spillover effects that made manufacturing more productive in the past,” says Elwyn Davies, Economist with the Equitable Growth, Finance, and Institutions Vice-Presidency and co-author of the book. The possibilities for remote delivery, as well as branching and franchising, increase opportunities for service providers to access larger markets. The use of digital technologies in business processes and the related expansion of intangible capital can drive innovation by complementing labor. Services also benefit other sectors, such as through being upstream enablers and downstream complements for manufactured goods.