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The Political Economy of the Service Transition$
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Anne Wren

Print publication date: 2013

Print ISBN-13: 9780199657285

Published to Oxford Scholarship Online: May 2013

DOI: 10.1093/acprof:oso/9780199657285.001.0001

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The Trilemma Revisited: Institutions, Inequality, and Employment Creation in an Era of ICT-Intensive Service Expansion

The Trilemma Revisited: Institutions, Inequality, and Employment Creation in an Era of ICT-Intensive Service Expansion

(p.108) 3 The Trilemma Revisited: Institutions, Inequality, and Employment Creation in an Era of ICT-Intensive Service Expansion
The Political Economy of the Service Transition

Anne Wren

Mate Fodor

Sotiria Theodoropoulou

Oxford University Press

The revolution in information and communications technology (ICT) has greatly enhanced the capacity for productivity growth, and for trade, in certain services. In this chapter, Wren, Fodor, and Theodoropoulou examine some of the distributional and policy implications of expansion in knowledge-intensive service sectors. The authors argue that employment expansion in these sectors is facilitated where the wages of highly skilled workers are allowed to deviate from the average, and because of the incentives which this creates for investment in the college education is an essential complement to ICT investment. They stress, however, that this does not imply that inequality is a necessary condition for high-end service expansion: in more solidaristic wage setting environments, public educational investment can effectively substitute for private to facilitate employment expansion. Where wage compression is combined with low levels of public educational investment (in schools and colleges in particular), however, there is a risk that expansion in high-end service sectors may be restricted by an undersupply of appropriate skills. The authors support our arguments with multiple regression analysis of data from thirteen OECD countries between 1970 and 2000. They show that employment expansion in knowledge-intensive service sectors is facilitated by high-end wage inequality, and low levels of coordination in wage bargaining; but also that public investment in school and college-based education has positive effects on employment creation in these sectors which increase significantly in strength as the level of coordination of wage bargaining increases. In conclusion they examine the implications of their findings for Liberal, coordinated social democratic, and coordinated Christian democratic regimes.

Keywords:   knowledge intensive services, ICT revolution, service trade, inequality, employment, wage bargaining, educational investment, liberal regimes, coordinated regimes, service economy trilemma

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