Service Sector Development and its Determinants in Rwanda

42 Pages Posted: 16 Aug 2016

See all articles by Eric Uwitonze

Eric Uwitonze

Government of the Republic of Rwanda - Ministry of Gender and Family Promotion

Almas Heshmati

Sogang University; Jönköping International Business School

Abstract

The service sector is an avenue for economic transformation as not all countries have a competitive edge in manufacturing. The growing literature on service sector primarily focuses on its development in the US and Europe and on Asian emerging service economies like India. Not as much attention has been paid to the role that services can play in the economic growth of African countries primarily due to the high prevalence of agriculture in these countries. But with avenues of structural adjustments and globalization, some African countries have become service-based economies. Services are considered as an alternative to manufacturing-led development in Rwanda since its aims is to become a service-based hub to serve countries in the East African Community (EAC). Recently, the growth rate of the service sector has been impressive in the Rwandan economy. The present study is an attempt to study in detail the development of the service sector over the years in Rwanda's economy and empirically estimate its determinants by using an econometric methodology. The empirical results are based on micro-data collected during the Rwanda Enterprise Survey 2011 and the 2014 Establishment Census. The survey has data on 241 firms and establishments. Linear and limited dependent variable techniques are employed to investigate the factors behind the development of the service sector. Models are specified and estimated to assess the factors contributing to sales growth, innovation and turnovers of service firms. The results show the factors that have contributed to the development of the service sector. These factors can be used in forming public policy with the aim of using the service sector as a vehicle for speeding up the shift from a low income to a middle income state.

Keywords: limited dependent variables, services, openness, growth, East Africa, Rwanda

JEL Classification: C35, F13, G29, O47, O55

Suggested Citation

Uwitonze, Eric and Heshmati, Almas, Service Sector Development and its Determinants in Rwanda. IZA Discussion Paper No. 10117, Available at SSRN: https://ssrn.com/abstract=2822656 or http://dx.doi.org/10.2139/ssrn.2822656

Eric Uwitonze (Contact Author)

Government of the Republic of Rwanda - Ministry of Gender and Family Promotion ( email )

BP: 969
Kigali
Rwanda

Almas Heshmati

Sogang University ( email )

Seoul 121-742
Korea, Republic of (South Korea)
0082-2-705-8771 (Phone)

HOME PAGE: http://www.sogang.ac.kr/english/academic/03_under_0123.html

Jönköping International Business School ( email )

Jönköping, 551 11
Sweden

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