Abstract
The goal of this paper is to examine the role of the service sector in the process of industrialization. We propose a model which recognizes that (non-traded) services are demanded by consumers as well as producers. Income increases thus lower production costs of industrial goods. The inclusion of non-traded services enables us to explain how a primary exporting economy can industrialize without resorting to protection. This paper can be construed as a formalization of some aspects of the Staple Theory of Growth.
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