Unconditional convergence of labor productivity in the service sector

Abstract

Using disaggregated service sector data for 95 countries, we found unconditional convergence in real labor productivity for the service sector. The aggregate service sector yields a large unconditional convergence coefficient of −0.035; we also found the presence of unconditional convergence for individual sub-sectors. Since the service sector now faces both domestic and international competition, the presence of unconditional convergence in labor productivity in this sector is not surprising. Unlike Rodrik (2013), we found evidence of unconditional convergence for aggregate labor productivity in the most recent data available, and the convergence of the service sector productivity appears to be a crucial component of this reversal.