Contribution of Knowledge-Intensive Services to Economic Growth

In today’s economy, the service sectors comprise 65-75% of the economy in most advanced countries; however, fewer empirical and statistical studies have been performed with regard to the service sectors than manufacturing sectors to verify their impact on economic growth. In line with a recent trend in which services are becoming more knowledge-intensive, this paper focuses on Knowledge-intensive Service (KIS) activities, which produce and integrate existing service activities, and enhance knowledge production. The effect of KIS on macroeconomic indicators is examined in a Real Business Cycle (RBC) model with multiple regression analysis and simulation. According to these analyses, it is revealed that the trend of investment into KIS has a strong correlation with aggregate output and consumption, government expenditures, capital stock, and productivity, and that KIS output tends to grow in proportion to these macroeconomic trends. With further analysis, it is clarified that KIS activities contribute to capital deepening and productivity improvement. Therefore, it can be said that it is important to study KIS with regard to its impact on economic growth.