Service development accounts for an even smaller share of European R&D investments than we may think

What is it about?

Services permeate modern economies. But contrary to recent claims, investment in R&D is still closely connected to the production and development of physical goods. Service development accounts for an even smaller share of European R&D investments than we may think, argues Eric Giertz and I in this paper.

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Why is it important?

Economists and analysts often use firms' sector classification as a basis for aggregating firm-level data to economic indicators. In the rapidly changing economy, this practice may lead to more confusion than insight. The paper offers a discussion of potential errors and alternatives.