Please wait a minute...

Frontiers of Economics in China

Front Econ Chin    2011, Vol. 6 Issue (3) : 413-446     DOI: 10.1007/s11459-011-0140-6
research-article |
The Underdevelopment of Service Industry in China: An Empirical Study of Cities in Yangtze River Delta
Jianghuai Zheng1(),, Yu Wang3
1. School of Economics, Nanjing University, Nanjing 210093, China Yangtze River Delta Research Center on Economic and Social Development, Nanjing University, Nanjing 210093, China; 2. School of Economics, Nanjing University, Nanjing 210093, China; 3. School of Economics, Nanjing University, Nanjing 210093, China
Download: PDF(774 KB)   HTML
Export: BibTeX | EndNote | Reference Manager | ProCite | RefWorks

The service industry in China is underdeveloped, in comparison with not only the past experience of developed countries at the similar level of GDP per capita, but also other similar developing countries at present. We define this deviation of China’s service industry from the development trend in other countries as the “development deviation puzzle,” and propose a conceptual framework based on the “manufacturing cost disease” hypothesis to understand the reasons behind this puzzle. We test our hypothesis using the data from the urban cluster in Yangtze River Delta. The results indicate that labor productivity growth in service industry is driven by capital investment and the “development deviation puzzle” is indeed rooted in the “manufacturing cost disease.” Our analysis suggests that, to correct the underdevelopment of service industry, the strategy of investment-driven industrialization and urbanization must be changed. Expansion of producer services is important in increasing the intensities of human capital and foreign investment.

Keywords service sector      manufacturing sector      cost disease      labor productivity      economic development     
Corresponding Authors: Jianghuai Zheng,   
Issue Date: 05 September 2011
 Cite this article:   
Jianghuai Zheng,,Yu Wang. The Underdevelopment of Service Industry in China: An Empirical Study of Cities in Yangtze River Delta[J]. Front Econ Chin, 2011, 6(3): 413-446.
E-mail this article
E-mail Alert
Articles by authors
Jianghuai Zheng
Yu Wang
Related articles from Frontiers Journals
[1] Haiwen Zhou,Ruhai Zhou. A Dynamic Model of the Choice of Technology in Economic Development[J]. Front. Econ. China, 2016, 11(3): 498-518.
[2] Haiwen Zhou. Unemployment and Economic Integration for Developing Countries[J]. Front. Econ. China, 2015, 10(4): 664-690.
[3] Xiaoli He,Hongwu Wang,Haoran Pan. Energy Consumption, Economic Development and Temperature in China: Evidence from PSTR Model[J]. Front. Econ. China, 2014, 9(4): 695-712.
[4] Haiwen Zhou. The Choice of Technology and Rural-Urban Migration in Economic Development[J]. Front Econ Chin, 2013, 8(3): 337-361.
[5] Jingwen Yu, Chunchao Wang. What Role Does the Political Environment Play in Economic Development? —A Case Study of Fujian Province[J]. Front Econ Chin, 2012, 7(4): 544-559.
[6] Xue Qiao, Xiaohan Zhong, Sin Sung. Economic Development, Risky Sexual Behavior, and AIDS Epidemics—Theory and Evidence[J]. Front Econ Chin, 2012, 7(3): 407-433.
[7] Jiyong Chen, Wei Liu, Yibo Zhang, Yangyi Sheng. An Empirical Study on FDI International Knowledge Spillovers and Regional Economic Development in China[J]. Front Econ Chin, 2010, 5(3): 489-508.
[8] Qiu Bin, YANG Shuai, XIN Peijiang, Berna KIRKULAK. FDI technology spillover and the productivity growth of China’s manufacturing sector[J]. Front Econ Chin, 2009, 4(2): 209-227.
[9] XIN Xiangfei , LIU Xiaoyun. Regional disparity of factor endowment and agricultural labor productivity in China[J]. Front. Econ. China, 2008, 3(3): 380-409.
[10] NING Guangjie. Wage forming mechanism in the market transitional process of China (1993—2005): Evidence from the provincial panel data[J]. Front. Econ. China, 2008, 3(2): 312-326.
[11] FAN Jianyong. Industrial agglomeration and difference of regional productivity[J]. Front. Econ. China, 2007, 2(3): 346-361.
[12] ZHANG Xiaodi, SUN Jingwei. An analysis of China’s global industrial competitive strength based on vertical specialization[J]. Front. Econ. China, 2007, 2(1): 57-73.
[13] ZHU Pingfang, LI Lei. Direct effect of ownership and technology import: Firm level evidence from large and medium-enterprises in Shanghai[J]. Front. Econ. China, 2007, 2(1): 74-91.
Full text