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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.

Photo: Karl Gabor.

IFN maintains a line of 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, and consequences of introducing welfare technology. In education, research topics include measures of school quality and the importance of national reforms.

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.

The program also contains studies of market structure and productivity in retail and the importance of population density in service markets.

Finally, there is research on personal traits. The ability to cope with stress, self-discipline, and social skills are all valuable characteristics in many service occupations.

Some of our research questions are:

- What is the difference between private and public production of welfare services?

-  What are the effects of employment protection legislation?

- How should we measure school quality?

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