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The Effect of Structural Change in Domestic Manufacturing Industry on Growth of Service Industry and its Implications

Author Geonwoo Lee Date 2014.03.25 Issue No 583

 It is analyzed not to be an obvious trend yet in Korea that a structural change in manufacturing industry generally increases an intermediate input of services in the production process of manufacturing industry, and this again results in a growth of service industry.  

●Although there is partially occurring structural change in the manufacturing sector since the late 2000s, the effect of that change is yet negligible in leading the growth of service industry.
The biggest factor leading the growth of service industry appeared to be the consumption on services while the second factor was the export of manufacturing sector.

● This implies that service industry has been developed mainly by the increase in final consumption resulting from a rise in income level rather than relying on the production activity of manufacturing sector.

In case of Korea, the low effect of the structural change in domestic manufacturing sector stems from the underdeveloped and underutilized producer services which play a role of mediator agent between manufacturing and service industries.