Productivity of Service Providers: Microeconometric measurement in the case of hair salons

Abstract

In this paper we measure the productivity of service industries using micro dataset. The "service industry" is a very broad category including many sectors, such as education, finance, insurance, transportation, logistics, food service, and many more. These sectors exhibit, in our understanding, very different structures from one another, and it is not easy to construct one model that can be applied to all service sectors. It is common in the literature to measure the productivity of manufacturing industries, typically by the Solow residual or its modification from production function estimations. We may possibly follow the same track in studying productivity in service industries. However, they may be different in their structures. In the case of hair salon services, it is impossible for service providers to hold inventories. They can serve only when customers arrive at the hair salon.1In this paper, we study the case of hairdressers using micro data collected by hair salons. We believe that our approach is applicable to the food industry, beauty industry and health clinic industry.