The increasing service intensity of European manufacturing

This paper investigates the impact of the increase in service output on the demand for different categories of service occupations in the EU manufacturing sector. Furthermore, we investigate the impact of the global sourcing of producer services on the demand for different service occupations. Using fixed-effects models based on the manufacturing sector for 18 EU countries for the period 1995-2008, we find that the employment share of service occupations is significantly and positively related to the output share of producer services in manufacturing. In particular, the increase in the output share of services accounts for an average of 13 percent of the increase in the share of service occupations. When service occupations are disaggregated by different categories, we find that the output share of services is significantly and positively related to the share of managers, professionals, and technicians. In contrast, service occupations involving clerks, administrative support, and other office-related personnel do not benefit from increasing service revenues. Finally, professionals and technicians are complementary to intermediate producer services (either from domestic or foreign suppliers), while clerks do not benefit from the rise in intermediate service inputs in manufacturing.