Review Paper 1

Linkages between Services and Manufacturing in EU countries

Martin Falk (WIFO) and Elena Jarocinska (CASE)



In this paper, we look at the linkages between manufacturing and services both on the input side (i.e. use of services occupations in manufacturing, use of intermediate service inputs) and on the output side (i.e. service turnover in manufacturing). By using different data sources, we provide a comprehensive picture of the direct and indirect linkages between manufacturing and services for the EU-25 countries and the US. We find that direct and backward linkages between manufacturing and services increased in the last few decades with the change more substantial for the backward linkages. Similarly, there is an increase in service occupations in manufacturing. On the output side, manufacturing firms generate an increasing proportion of sales from services activities. Overall, the dividing line between manufacturing firms and service firms becomes less clear. Given the increasing service intensity of manufacturing, one can conclude that service trade barriers not only affect the service sector but also manufacturing firms.


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