A model adapted from Baumol (American Economic Review, 57, 1967, 415-26) is
used to establish the determinants of growth in per capita commercial serv
ice sector output and this service sector's share of employment, based on t
he experience of Canada, the US, France and Germany. Parameter estimates ob
tained from the OECD data, for the period 1977-92, are used within the mode
l framework to predict the output and employment dimensions of economic res
tructuring and growth. A comparison of model predictions with observations
suggests the model can explain most of the observed service sector output g
rowth, but it has less success explaining growth in employment shares. Thes
e results illustrate the difficulties of confronting the performance of sim
ple models with empirical evidence and the challenge that remains in discov
ering additional explanations of economic restructuring.