The Economics of the Service Sector

A flourishing enterprise sector is continuously changing. While manufacturing firms are undergoing “servitization”, service companies go through “industrialization” by standardizing production processes in order to increase production volumes. Today, over 80 percent of total employment is based in the service sector.

In the most recent decade, it is the private service industries – in particular knowledge intensive companies – that have delivered employment growth. At the same time, the public debate on tax financed services such as healthcare, education and elderly care has continued.

IFN is maintaining and strengthening our research on services with a strong public component. Areas of study are management and efficiency differences in service production, market models and forms of competition, as well as the future financing of public services. Related projects deal with location choices of independent schools and behavioral aspects of institutional design.

Minimum wages are particularly relevant in the service sector, where they are binding in several occupations. The program provides information on the levels and differentiation of minimum wages in Sweden and examines the effects of minimum wages on employment and other outcomes.

The effects of employment protection also differ considerably between industries. The service sector has been a stepping stone to the labor market for a lot of young people and immigrants. At the same time, rigid rules of employment protection have been demonstrated to weaken the labor market prospects of these groups. The program contains both reviews of research on the effects of employment protection and applied research on the laws governing employment protection in Sweden.

Both minimum wages and employment protection are relatively important in the retail and hospitality sectors. The program contains several Swedish studies of market structure and productivity in retail as well as of location and innovation in the hospitality sector.

Finally, there is research on the importance of personal traits and human capital for economic outcomes. The ability to cope with stress, self-discipline and social skills are all valuable characteristics in many service occupations.

The main financial contributors of the program are Almega, the Jan Wallander and Tom Hedelius Foundation, and the Millenium Foundation.


Program Director: Henrik Jordahl


International cooperation

Visiting researchers

Collaborating with others is essential for IFN as a research institute. Our researchers co-author articles with colleagues from other institutes, and many also teach at various universities and colleges.

As part of our extensive program of guest researchers, leading international researchers visit the institute. The visitors present and pursue their research as well as interact and cooperate with researchers at IFN.

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Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 |