The Impact of Service Sector Growth on Intersectoral Linkages in the United States

Abstract

This article examines the impact of service sector growth on intersectoral linkages in the US economy since the 1940s. Input-output tables are used to determine direct and total back-ward linkages for a six-sector aggregation of the economy. The results show that the service sector ranks fifth in terms of the size of these linkage indicators. An added feature is the construction of economy-wide indexes of sectoral interdependence which are weighted averages of each sector's linkage effect, with the weights determined as each sector's share of national income. The main finding is that the combined effect of service sector growth and a pattern of low linkage effects associated with the service sector has led to a reduction in the degree of overall intersectoral linkage in the US economy over time. A major implication is that the pace of economic growth may be considerably lower in the future as a rising share of expenditures is accounted for by service-producing activities.

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