A note on the shift to a service-based economy and the consequences for regional growth

Using data for the 50 U.S. states we relate industry-specific employment growth rates over the period 1976-1989 to the industrial compositions of the states in 1976. We explore the idea that services and manufacturing are inextricably linked and that this interdependence may be beneficial to manufacturing (through knowledge spillovers, for example). Specifically, we test whether the manufacturing sector grew faster in service-based economies. Our evidence does not support the idea of cross-fertilization from services to manufacturing.