A non parametric analysis of the relative performance and efficiency patterns of service industries in the advanced countries

The service sector plays a key role determining long-term productivity growth rates and living standards due to the increasing share of services both in production and employment within developed economies. Secondly, it can impact the whole economy through its capacity to affect a country’s efficiency and technological frontier. Linking these two ideas, the aim of this paper is twofold. On one side, to analyse the behaviour of productivity in the service sector, both in aggregate and disaggregate terms, and also to explore some explaining factors related to its efficiency in shaping this sector. In doing so, we apply non-parametric approaches – concretely, Malmquist indices and frontier DEA techniques – for macroeconomic data provided by the EU KLEMS database for a set of OECD countries. The main results of the paper seem to outline a partial refutation of the traditional hypothesis of low productivity. There is a huge heterogeneity and dualism within the tertiary sector in the advanced economies. Finally, the results based on non-parametric approaches might complement those obtained by using traditional parametric estimations, widening the future options to measure and analyse the productivity and efficiency patterns in service industries.