Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334007 
Year of Publication: 
2025
Series/Report no.: 
ETLA Report No. 167
Publisher: 
The Research Institute of the Finnish Economy (ETLA), Helsinki
Abstract: 
This report examines the factors shaping productivity in Finland's private service industries. Specifically, we focus on the link between capital intensity and labor productivity, as well as the allocation of labor. In addition, the report highlights the roles of global megatrends, such as offshoring, digital adoption and generative AI, in productivity development. Using firmand industry-level data, three broad patterns emerge. First, capital intensity in Finnish service industries is consistently below that of peer countries and is closely associated with weaker productivity. Second, firms systematically employ fewer workers than implied by profit-maximizing conditions, with gaps especially pronounced in knowledge-intensive services. Third, digital adoption is uneven: firms with broader use of digital technologies perform better, while many smaller and traditional providers lag behind. Scenario analysis suggests that generative AI could raise economic growth if paired with capital investment, while the offshoring of services does not appear to improve productivity but may support employment and reshape the composition of the workforce. The findings indicate that Finland's service productivity challenges are long-standing and structural rather than short-term fluctuations.
Subjects: 
Capital intensity
Digitalization
Offshoring
Productivity
Service industries
JEL: 
C23
F14
L80
O14
O30
O33
O47
Document Type: 
Research Report

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