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Changing Trends in U.S. States Services
Aug 29, 2001

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  • Services have become increasingly important during the past twenty years in both large and small U.S. states. While services account for more than 85% of the New York State economy, 80% in California and 78% in the Florida economy, they generate close 76% of the gross state product (GSP) in Alabama. Even in Michigan, traditionally a manufacturing stronghold, or in North Dakota where agriculture has played a critical role, services account for 63% and 81% of state GSP respectively.

    The recent drive of the services sector has been fueled by growth in business services and health services, while financial services, despite remaining the most important services sector in all states, have reduced their share of the services sector product.

    Growing services output in states with a tradition in agriculture or manufacturing has reduced the contribution that services in states such as New York make to the overall U.S. services output. In a steady trend from 1977 to 1997 New York Stateís share in U.S. services output decreased by 2 percentage points. This trend was fostered by a reduction in the share of business services produced in New York from 14% of U.S. business services in 1977 to about 8% in 1997. New York state has also decreased its share of health services in the total health services provided in the U.S.

    Californiaís services sector contributes to over 15% of the U.S. services gross domestic product (GDP) and is the state with the largest supply of services, followed by New York State. Among the large states Texas and Florida have increased in the past twenty years largest there share of services output while Illinois and Michigan have experienced a decrease in their respective shares of services supplied. Florida has experienced the largest increase in the share of services supplied passing from just over 4% to close to 6% of U.S. services output. In turn, Illinois and Michigan have reduced their shares of services output by close to 0.5%, being most noticeable in Michigan that has the smallest contribution to services output among the large states.

    These trends among the large the states are also explained by changes in the supply of business services and health services. While Texas and Florida have increased their share of business services by close to two percentage points since 1977, Illinoisís share of business services has dropped by 0.5% while Michiganís has remained the same, just above 3%.

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