The increasing service intensity of European manufacturing

In this study, using fixed-effects models based on the manufacturing sector for 18 European Union countries for the period 1995-2008, we find that the employment share of service occupations is significantly and positively related to the output share of producer services in manufacturing. In particular, the increase in the output share of services accounts for an average of 13% of the increase in the share of service occupations. When service occupations are disaggregated by different categories, we find that the output share of services is significantly and positively related to the share of managers, professionals, and technicians. In contrast, the remaining service occupations do not benefit from the increase in service revenues. Finally, professionals and technicians are complementary to purchased services (from either domestic or foreign suppliers).