Page 158 - Contributed Paper Session (CPS) - Volume 1

CPS1239 Valerie M.B. et al.
There are variants of this Figure 1: The Servification of Manufacturing
relationship. An example is the
movement from producing songs
on compact disks to making them
available digitally: The music
industry is still alive but is
reclassified from producing
a“good” to producing a “service.”
Another example is when an auto
company separates its auto
maintenance and leasing
business. Each unit can act
separately, but the efficiency and survival of the service and leasing units
depend on the extent of sales of that type of car (subordination of the service
to the manufacturing process
When services are bundled with goods sold by manufacturing firms,
the measure of their contribution to value added gets complicated. In
theory, national accounts should reflect the division between in-house goods
and services of servicification. For example, the total output of a
manufacturing firm that offers financing should be recorded as two separate
transactions: the first as a good, and the second as a service. In practice, there
are likely to be differences across countries and industries regarding how
output is measured and recorded by national statistical offices. It is especially
difficult to disaggregate output when the sale is conducted as a single
transaction or when the service is not “consumed” simultaneously with the
good (e.g., maintenance or repair). As a result, the servitization of
manufacturing output is likely to be understated in national accounts. Crozet
and Milet (2017) thus refer to this phenomenon as “hidden
deindustrialization.” Box 1 discusses the main challenges for national accounts.

Box 1: CAN NATIONAL ACCOUNTS ADEQUATELY MEASURE TODAY’S
PRODUCTIVITY?
National accounts were conceived during a very different time to
today. Colin Clark, Simon Kuznets, and Richard Stone of the UK began to
conceive the national accounts in the 1930s. This was a time when
manufacturing and construction were the engines of growth: The production
of goods was a clearly tangible process of man “working” with machines or
tools to transform mostly physical goods into consumable outputs. Services
were sometimes supportive (for example, transportation utilities, etc.). But
services were mostly consumable or publicly provided; they were considered
marginal to production or a leisure activity. To draw a line as to what should
be value added in a given year, Kuznets chose to consider only “productive”

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