The Relationship Between The Development Of Producer Service And Economic Growth

Baumol’s Unbalanced Growth Model gets the conclusion that the service sector constrains the growth of city economy. The empirical results of some developed countries show that the productivity of modern service hasn’t been improved by the progress of advanced technology. However, in reality, financial centers don’t turn up obvious’cost disease’phenomena, instead the producer service become the important industry of these cities.The study of the relation between the development of producer service and economic growth can direct the way of industrial adjustment and promote balanced growth of relative industries. London, New York and Tokyo are typical financial cities in the worldwide. The path and evolutionary model of their producer service have guiding meanings for’Two Center’construction of Shanghai. A conclusion can be obtained on the development of Baumol’s Unbalanced Growth Model that producer service affects the growth rate of a economy via two ways, one is the growth rate of labor productivity, which stimulates the economy directly and the other is the tech-intensive intermediate output of producer service which promotes the productivity of other industries, in hence brings the increase of growth rate and it also has compensation effect.The producer service of three financial cities have relatively high growth rate of labor productivities, meanwhile technology spillover effect is obvious. The growth rate of labor productivity of producer service in Shanghai is lower than that of other industries and the spillover effect is not obvious. Manufacturing is still the dominant sector of Shanghai. Manufacturing supports the development of the producer service while the latter has less input into the former because of the self-circulation of the producer service, which is found on the analysis of the input-output tables. Industries of producer service also have weak correlation between each other, Industrial hollowing is not the unique result of the construction of financial center and it can be avoided effectively by the development of pillar industries and the formation of industrial agglomeration.