Tertiarization and Human Capital: Do They Matter for Growth? Insights From Portugal

We investigate the existence of causality among sectoral productivity, services sector expansion, human capital, and aggregate productivity over the period 1970-2006 in the Portuguese economy taking into account the contribution of services sub-sectors with different potential for productivity improvements, market and non-market services. The main aim is to examine whether the increasing tertiarization of the Portuguese economy constituted an obstacle or an opportunity for its aggregate productivity performance and if the expansion of the services sector is related to human capital availability, based on the former disaggregation of the services sector. The evidence suggests bidirectional causality between sectoral and aggregate productivity, with sectoral employment shares and human capital not revealing themselves as relevant for the explanation of the other variables nor being influenced by them. Across services categories, non-market services seem to be the most influential one, making a positive and lasting contribution to aggregate productivity, while market services seem to have had no influence on aggregate productivity dynamics