The Distribution Sector and the Development Process: Are There Patterns? Yes

Using an increasing returns specification for distribution, an inverted U pattern between the share of distribution in gross domestic product and the level of development is shown to arise. A cross‐section time‐series data set is constructed and merged with one used to analyze the service sector. In contrast to the rising pattern found for services, an average time‐series relation that exhibits an inverted U pattern is established. The empirical results are robust, for example, to choice of functional form and country and time period coverage. A similar pattern is found in the average cross‐section (country) relation between distribution and development.