Abstract
With China’s service industry gradually overtaking manufacturing to become the largest sector of the economy, there are growing calls for stepped-up efforts to develop this “pillar industry.” However, this view is largely based on the traditional economic thought on industrial structure. In the context of global industrial integration today, the view is debatable. The American strategy of “re-industrialization” indicates that manufacturing in the national economy plays a role that is not replaceable by the service sector. We construct in this chapter a dynamic stochastic general equilibrium (DSGE) model for the manufacturing and service sectors, and analyze from the perspective of the two-sector integration, the economic impact of the transformation of industrial structure. A numerical simulation shows that in terms of the potential of economic growth, as the contribution of the service sector to GDP grows, technological innovations in manufacturing will have a reduced impact on GDP growth, while the impact of innovations in the service sector will not change much. The service sector acts as an “economic stabilizer,” but the externality of its technological progress on the overall economic system is weaker than that of the manufacturing sector. A balance needs to be achieved in developing the manufacturing and service sectors in the future process of “upgrading the industrial structure.”
CLC No.: F062.9 Document Code: A Paper No.: 1002-8102(2016)03_0138_10
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
Although the technical level of the service industry and the growth of the service sector are not as close as the manufacturing industry, some scholars have demonstrated the correlation between the two. Cheng Dazhong (2010) carried out empirical analysis and numerical simulation of the general equilibrium relationship between the service industry and economic growth by using the 1991–2006 general data of China and the 1996–2005 provincial panel data. He found that increasing service productivity and its growth rate are more significant for increasing services output and will have a permanent positive impact on the growth of the service sector and the overall economy. Therefore, in this chapter, we simulated the pulse response process of GDP under the impact of TFP to describe the degree of correlation between the technological level of the service sector and economic growth.
References
Dazhong, Cheng, China’s Service Sector and Economic Growth: General Equilibrium Model and Empirical Study, The Journal of World Economy, No. 10, 2010.
He, Dexu, and Yao, Zhanqi, Several Isues in Accelerating the Development of Modern Service Sector, Finance & Trade Economics No. 5, 2008.
Huang, Yongchun, Zheng, Jianghuai, Yang, Yewen, and Zhu, Lvjing, On Conflicts between “De-industrialization” inChina and “Re-industrialization” in America, China Industrial Economics, No. 3, 2013.
Kuznets, Simon, Economic Growth of Nations: Total Output and Production Structure, Translated by Chang Xun, et al., Commercial Press, 1971.
Liu, Wei and Zhang, Hui, Industrial Structure Change and Technological Progress in China’s Economic Growth, Economic Research Journal, No. 11, 2008.
Li, Gang, Can Service sector Become the Driving Force of China’s Economy? China Industrial Economics, No, 4, 2013.
Lyu, Tie, On the Influence of Structural Change of Manufacturing Industry on Productivity Growth, Management World, No. 2, 2002.
Rostow, W. W., The Stages of Economic Growth, Translated by Guo Xibao, Commercial Press, 1962.
Pang, Ruizhi and Deng, Zhongqi, Is the Productivity of the Service Sector Really Low? Economic Research Journal, No. 12, 2014.
Chenery, Hollis B., Industrialization and Growth: A Comparative Study, Translated by Wu Qi et al., Shanghai Joint Publishing, 1989.
Lixue, Wu, Energy Efficiency Fluctuation in China: Theoretical Explanation, Numerical Simulation, and Policy Implications, Economic Research Journal, No. 5, 2009.
Wu, Xiaoying, Measurement and Explanation: The Total Factor Productivity of Chinese Industry, Comparative Studies, No. 6, 2013.
Yang, Yong, Recalculation of Total Factor Productivity of China’s Service Sector, The Journal of World Economy, No. 10, 2008.
Yang, Zhiyuan and Tan, Wenjun, Technological Progress, Trade Volatility, and Service Sector Growth, Finance & Trade Economics, No. 2, 2014
Yuan, Zhigang and Gao, Hong, The Multiplier Effect of China’s Urban Manufacturing Employment on Service Sector, Economic Research Journal, No. 7, 2015.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 The Author(s)
About this chapter
Cite this chapter
Qu, S., Lyu, T. (2019). Does the Upgrading of Industrial Structure Mean Service Sector Is More Important?. In: He, D., Wang, C. (eds) A New Era. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-8357-0_6
Download citation
DOI: https://doi.org/10.1007/978-981-10-8357-0_6
Published:
Publisher Name: Palgrave Macmillan, Singapore
Print ISBN: 978-981-10-8356-3
Online ISBN: 978-981-10-8357-0
eBook Packages: Political Science and International StudiesPolitical Science and International Studies (R0)