Home Economy The Prospects for Services-Led Development

The Prospects for Services-Led Development

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The path of economic development for countries around the world has followed a similar pattern of sectoral shifts: from agriculture to manufacturing to services.

This pattern was followed (at different times) both by today’s high-income countries including the United States, countries western Europe, Japan, and South Korea, and also by rising economies like China.

But the nature of manufacturing has been changing. Across many industries, the importance of low-cost labor has declined, while the cost of machine-driven manufacturing and robotics has been falling while its capabilities keep rising. Dani Rodrik has called this the problem of “premature de-industrialization”–that is, the potential for development through a movement from low-wage manufacturing to higher-wage manufacturing has diminished, even though a number of countries still very much need a path to economic development. Moreover, services have been growing faster than…

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