The Analysis On The Spillover Effect Of Service Industry In Relation To Industrial Sector

China is currently in the primary stage of socialism, and there is a widely accepted point of view that we should develop the industry first, when the industrial sector is been established, all the other kinds of industry can also be developed. This point of view only sees the strong spillover effect the industrial sector bring to the other, but it fails to see that spillover effect may also exists in other kinds of industry, especially service, the development of service industry can be a promotion to the industry itself. We can see from the research on the industrial structures of some developed countries that the proportion of added value of service and employment is much bigger than the industry. Service will play more and more important role in the development of economy in each country, the development and the competitive ability of service can reflect the potential of the economy of one country in the future. We need to think over the development of service, its reason and history, especially the connection between the service and industry and do more research about it. This paper, takes the situation of Sichuan province as an example, to do some empirical analysis about the latent spillover effect exists in the industrial sector, and helps to recognize the important role of service industry. Here are some research ways to realize that goal.First , based on the two-sector model, this paper analyses the spillover effect of service industry. By using the Sichuan province's panel data between 1998—2005, our estimations shows that the spillover effect of service industry in relation to industrial sectors is obviously and is going down. Service, especially productive services development should be vigorously.Secondly,By using the VAR model, this paper analyses the relation between the industrial sector and the sevice industry of Sichuan Province in 1978—2004 for the purpose of reflecting the dynamic changes of the spillover effect which the sevice industry brings to the industrial sector. Our estimations shows that the spillover effect of service industry in relation to industrial sectors is obviously,so is the industrial sector. There is a dynamic relationship showing reciprocity and interdependence between the industrial sector and the sevice industry.