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Reports 2018/12

Structural development in the market economy of mainland Norway 1997-2014

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Using the Norwegian KLEMS database, this report investigates the structural development in the market economy of mainland Norway over 1997-2014.

The findings largely confirm the trends that have been identified by many other studies: an increasing share was found in output and employment of services at the expense of goods production; services had become the largest sector in terms of output and employment; productivity growth in goods production sector was higher than in services sector over the entire period.

However, when considering the changes between two subperiods (i.e. 1997-2006, and 2006-2014), productivity performance in the goods production sector was weaker in the first subperiod, while much stronger in the second, than in the services sector.

Moreover, a more detailed sector analysis reveals very substantial heterogeneity both within the goods production sector and among the services sector, leaving the traditional distinction between goods and services outdated. In particular, the characterization of services as stagnant in terms of productivity growth and input structure is no longer true.

Based on the calculated input intensity measures, an increased share of skilled labour in value added is found for the total market economy of mainland Norway over the entire period, as well as for almost all the sectors, at least for the latter period (2008-2014). For the total market economy, the shares in value added of both Software and R&D capital increased, while those of Hardware decreased, for the whole period 1997-2014. With a few exceptions, this finding also holds for almost all the sectors, at least for the latter period (2008-2014).

Finally, the test results show that the complementarity hypothesis between the use of ICT capital and skilled labour is not supported by the Norwegian data. On the other hand, the existence of complementarity between the use of IPP capital and highly skilled labour seems to be suggestive. Furthermore, the complementarity relationship between R&D and highly skilled labour is strongly suggestive based on the Norwegian data.

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