The Industrial Revolution in Services
October 2021
Working Paper Number:
CES-21-34
Abstract
The U.S. has experienced an industrial revolution in services. Firms in service industries, those where output has to be supplied locally, increasingly operate in more markets. Employment, sales, and spending on fixed costs such as R&D and managerial employment have increased rapidly in these industries. These changes have favored top firms the most and have led to increasing national concentration in service industries. Top firms in service industries have grown entirely by expanding into new local markets that are predominantly small and mid-sized U.S. cities. Market concentration at the local level has decreased in all U.S. cities but by significantly more in cities thatwere initially small. These facts are consistent with the availability of a new menu of fixed-cost-intensive technologies in service sectors that enable adopters to produce at lower marginal costs in any markets. The entry of top service firms into new local markets has led to substantial unmeasured productivity growth, particularly in small markets.
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:
market,
production,
industrial,
company,
growth,
monopolistic,
monopolistically,
sector,
industry growth,
specialization,
metropolitan,
franchising,
industry concentration,
restaurant,
city,
warehouse,
amenity
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Bureau of Labor Statistics,
Center for Economic Studies,
Total Factor Productivity,
National Establishment Time Series,
Longitudinal Business Database,
Economic Census,
Wholesale Trade,
North American Industry Classification System,
Information and Communication Technology Survey,
CDF,
Herfindahl Hirschman Index,
Quarterly Census of Employment and Wages,
Herfindahl-Hirschman,
Disclosure Review Board,
Federal Statistical Research Data Center
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