Economic development in Taiwan has followed a course similar to other countries, evolving from an economy based on the agriculture to sector to the manufacturing industry, and then to the service sector which accounts for the largest share of both GDP and employment. In Taiwan’s case, according to the statistics of the Directorate General of Budget, Accounting and Statistics（DGBAS）, the service sector’s share of GDP is higher than its share of employment. This fact raises following issues: Is this positive “gap” between the share of GDP held by the service sector and the share of employment held by the service sector a normal phenomenon in the course of economic development? How does Taiwan’s development compare with that of other countries in this respect? What are the factors behind the positive gap?
To answer these questions, this study makes use of time series data on the changes in Taiwan’s industrial structure, and undertakes comparison between Taiwan, the US and South Korea. The research results show that the gap reflects a disparity between the average labor productivity of the service sector and that of industry sector in Taiwan as a whole. If the average labor productivity of the service sector is higher than the average labor productivity of industry sector, then a the gap is negative. If the average labor productivity of the service sector is lower than the average labor productivity of industry sector. then the gap is negative. Using unadjusted DGBAS data, the results show a positive gap for the service sector during the period 1981 – 2005. This was true regardless of whether GDP was expressed using current prices or constant prices, although with constant prices the size of the gap reduces. After adjusting the GDP data to facilitate with the employment data, the gap was found to be smaller. Furthermore, when constant prices were used to calculate GDP, the gap shrinks over time. By compring our results with the cases of the US and South Korea, we can have following conclusions. The trend of the gap in Taiwan is similar to that of in the US However, the gap was positive in Taiwan. but negative in the US, and tended to get smaller over time. With GDP expressed in current prices, the gap had tended to fall in South Korea, whereas in Taiwan it had tended to increase. With GDP expressed in terms of constant prices, the gap had tended to fall for both Taiwan and South Korea, but in Taiwan the gap had remained positive , whereas in Korea a negative gap had developed.
This study also examines the gap for 2-digit industrial classification within the service sector, and try to find the determinates for the importance of statistical, systemic and market factors in the causation of the gap To take the year of 2005 as an example, it was found that the statistical factors were by far the most important compared to the factors of system and market.
