Services in Developing Economies: A New Chance for Catching-Up?
36 Pages Posted: 8 Mar 2016
Date Written: November 19, 2015
The paper analyses the potential contribution of services as a driving force of economic growth in developing countries within a Kaldorian framework. In doing so, we revisit Kaldor Growth Laws and econometrically test them for a number of economic activities (including four service branches) across twenty-nine developing countries from Asia, Latin-America and Sub-Saharan Africa during a time span of three decades (1975-2005). Panel data estimations are complemented with a decomposition of labour productivity growth by means of a shift-share analysis. The results induce to question the traditional role posed to services as unlikely drivers of productivity growth in developing economies. As a matter of fact, business services seem to allow productivity growth by the same Kaldorian mechanisms that have traditionally made manufacturing the key driver of growth.
Keywords: structural change, growth, development, productivity, Kaldor
JEL Classification: L16, O14, O47, C23
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