In most industrialised economies, service sectors do not only show high growth rates of output and employment : they also go through dramatic changes with respect to use of technology, innovation, and regulatory frameworks. Service sector performance becomes more and more important for the competitiveness of national economies. However, not all services grow at the same pace, and the growth of the sector as a whole is accompanied by changes in its structural configuration. These changes are due to driving forces which affect some sectors more than others. In recent years the most influential driving forces have been the following:
- technological change - mainly the diffusion of information technology in services;
- the internationalisation of service activities;
- new patterns of co-operation between manufacturing and service industries; and
- the deregulation and re-regulation of important service markets.
This paper will illustrate the dynamics of service sectors in Europe with special emphasis on Germany. In the first part, some statistical evidence about service sector dynamics will be presented. In the second part, the impact of three of
the main driving forces1, a new division of labour between sectors, introduction of information technology in services, and regulation on service sector development will be discussed. The third part will focus on the process of deregulation and re-regulation of the German telecommunication sector as an example of service market regulation in the case of transition from monopoly to competition. Finally, some conclusions will be drawn with respect to service policies and regulation.