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Vol. 65, No. 3, pp. 265-283 (2014)

“The Growth of “Non-material Services” in China: Maddison's “Zero-Labor-Productivity-Growth” Hypothesis Revisited”
Harry X. Wu (Institute of Economic Research, Hitotsubashi University)

This study revisits Maddison's controversial “zero-labor-productivity- growth” hypothesis on the growth of China's “non-material services”. I show that by controlling for the same development stage as the Chinese economy in 1993-2012, South Korea showed zero or slightly negative growth in those services in 1970-90. I also show that physical indicators on education and healthcare industries do not show any significant labor productivity growth. To improve Maddison's earlier work, I have adjusted the 1990s structural break in employment series, converted numbers to hours worked, and reconstructed military personnel. I also allow one to two percent growth of labor productivity to reflect the correction to factor cost distortions. My new results suggest that the labor productivity growth of this sector is between 2.2 and 2.9 percent per annum in 1993-2012.