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Thirty years ago, when the Treaty of Rome came into effect, agriculture and manufacturing dominated activity in the European Community (EC). Today, in every member state, services account for more production and employment than agriculture and manufacturing combined. The growing role of services in domestic economies is the result of both demand and supply factors. On the demand side, the major impetus has come from firms that have shifted from providing services they require `in-house' to purchasing these services outside the firm. On the supply side, the main factors have been technological change and deregulation. This paper is part of a study of the impact of 1992 on European service industries. Its purpose is to provide a methodological framework for analysing the structure of the market for services in Europe on the eve of 1992. The paper identifies three essential features that distinguish services from other economic activities. These features are used to examine in detail factors that determine the market structure of service industries. The conclusion offers conjectures about the future shape of service industries in Europe.
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