report. Secondly, even though there have been no productivity improvements in a particular service that a country export, they may still register and increased _PRODY_ for that export if the broader category it belongs to have made productivity improvements.<sup>10</sup>

**Table 2. Global PRODY for service exports**

|**Global PRODY by**<br>Transportation|**sub-service**<br>Travel|**s for the World**<br>Communication|Construction|Insurance|Financial|Computer &<br>Information|Royalties &<br>License Fees<br>|Other business<br>services|Personal,<br>cultural and<br>recreational<br>services|
|---|---|---|---|---|---|---|---|---|---|
|1990<br>7420|7372|7343|13073|6906|20649|16414|10040|7456|18054|
|1991<br>7936|7489|7307|16415|6956|17560|16073|7424|7342|16303|
|1992<br>7981|7193|6801|17275|7817|19216|14403|8656|7648|12058|
|1993<br>8164|7311|4934|14453|7823|17603|14644|8999|7856|6394|
|1994<br>8255|7542|5241|13066|8278|14871|11120|9407|8299|8695|
|1995<br>9214|7691|5937|12780|11222|21643|16844|17054|8698|11607|
|1996<br>9135|7828|6255|12840|11448|22384|17131|15034|8920|12783|
|1997<br>9263|7943|6174|8980|11498|23841|18015|11576|9107|13953|
|1998<br>9800|7684|6346|10104|11201|22416|22789|12153|9710|12344|
|1999<br>10319|7951|6503|10210|11075|23612|22433|14409|10013|13216|
|2000<br>10516|8082|6553|10422|10856|24409|19852|14973|10763|14282|
|2001<br>11213|8408|6552|9695|10496|25160|18058|15318|11132|14613|
|2002<br>11559|8696|6467|9185|13842|24862|17906|14828|11812|13442|
|2003<br>11870|8769|6926|8232|15187|22486|17961|14670|12725|13615|
|2004<br>12656|9086|7932|9494|14894|23871|19150|12611|13175|14491|
|2005<br>12575|9312|9205|11402|15725|25444|19226|14610|13940|15374|
|2006<br>12779|9653|9522|12691|14316|28546|19090|12488|15557|16490|
|2007<br>12751|9986|7518|12593|13721|31167|19129|18158|16191|16192|
|Mean<br>10,189|8,222|6,862|11,828|11,292|22,763|17,791|12,912|10,575|13,550|
|_Source_: Authors‘ calculatio<br>Standard Deviation<br>1,870|ns.<br>846|1,172|2,541|2,885|3,925|2,770|3,047|2,784|2,792|

_Source_ : Authors‘ calculations.

Our aim is to highlight these issues of measurement as the next generation of growth is being fueled by services and academics and policymakers should to be aware of these issues when they think about new strategies for economic development. While we acknowledge that the data on service exports is far from perfect, we would still argue that it is good enough to get a first picture of service export sophistication dynamics and its relation to growth, which is where we turn our attention now.

Figure 8 shows the evolution of _Service EXPY_ over time for selected countries. The following two figures show log _Service EXPY_ against log GDP per capita. The relationship is positive. In order to look at the evolution of service export sophistication over time, we contrast the level correlation in 1992 and 2007 in Figures 9 and 10 respectively. For both time periods, the scales have been kept constant as we want to bring the attention to the shifting paradigm of service exports globally. India and China started at similar income levels in 1992 but India jumped up by 2007. In accordance to Kaldor‘s law, as the world gets richer, services become an important driver of the global economy. In Figure 11 we show S _ervice EXPY_ against _Goods EXPY_ . The

> 10 For example, India‘s export of computer information services from 1990 till later in 1990‘s was 0. With the ICT boom, India‘s share of Computer & Information services rose to 0.43. This is almost half of Indian service exports. With PRODY for Computer & Information services (CIS) rising faster, a higher share of exporting CIS resulted in India‘s Service EXPY to match that of the UK by 2007 even though its income per capita was substantially lower.  Another example is Saudi Arabia. The PRODY of the category other business services (OBS), which include management consulting, legal services, accounting, auditing and other professional and miscellaneous services is relatively high.  Saudi Arabia has reported all of its services exports since 1990 to 2007 under OBS hence its share is 1. As the Global PRODY increased for OBS, Saudi Arabia‘s Service EXPY also rose and by 2007 its EXPY was at par with the United States.

14