Directorate for Science, Technology and Innovation

Enhancing the Performance of the Services Sector


This report shows that a well-functioning services sector is key to the overall economic performance of OECD countries and to the welfare of its citizens. Reform of services sector policies provides an important opportunity for policy makers to strengthen employment, productivity and innovation. It will also help in strengthening the capacity of OECD economies to adjust to economic globalisation in services and to the growing importance of services for the future growth of OECD economies.

The policies outlined in this report can contribute to such reform and are mutually reinforcing. This is important since seizing the new growth opportunities in the services sector will be possible only through a comprehensive strategy based on a policy mix that is suited to each country or circumstance. The report focuses on the role of labour and product markets, the impact of barriers to trade in services, the role of innovation in services and the impacts of information and communications technology (ICT) on services. It also includes a paper presenting case studies of successful services firms, which points to the importance of open markets, innovation and work organization.

The report responds to concerns about the poor performance of the services sector in many OECD economies. The services sector now accounts for over 70% of total employment and value added in OECD economies. It also accounts for almost all employment growth in the OECD area. But despite its growing weight, productivity growth in services has been slow in many OECD countries and the share of the working-age population employed in services remains low in many countries. If policy makers wish to strengthen economic growth and improve the foundations for the future performance of OECD economies, the services sector will need to do better than at present.

To help address this policy challenge, the Ministerial Council asked the OECD at its meeting of May 2003 to analyse the contribution made by the services sector to employment growth, productivity and innovation and identify factors, institutions and policies that could enhance the growth prospects of this sector. A short synthesis of this work, drawing the main policy conclusions from the OECD work, was presented to the OECD Council Ministerial meeting in May 2005, under the title Growth in Services: Fostering Employment, Productivity and Innovation.

This report provides the background to the synthesis report and brings together nine papers that were presented at an OECD workshop in February 2005. The studies address the main areas of the OECD work, notably trends and patterns in services (Chapter 2), the role of labour and product markets (Chapter 3), the benefits of opening international markets to trade in services (Chapters 4 and 5), innovation in services (Chapter 6), the role of ICT in services and the increasingly global nature of some services (Chapters 7 and 8), as well as case studies from successful services companies (Chapter 9). The synthesis report to Ministers is reproduced as Chapter 1 of the report, and also serves as the introduction.

Readers can access the publication choosing from the following options:

  • Subscribers and readers at subscribing institutions can access the online edition via SourceOECD, our online library.
  • Non-subscribers can browse and purchase the PDF e-book and/or printed edition on the OECD On-line Bookshop.

See also two recent STI Working Papers, which are available for free download at

  • STI Working Paper 2005/7: Case Studies of Successful Companies in the Services Sector and Lessons for Public Policy (expands upon Chapter 9 of the report)
  • STI Working Paper 2005/3: The Service Economy in OECD Countries 



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