IDEAS home Printed from https://ideas.repec.org/a/ags/afjecr/304723.html
   My bibliography  Save this article

The Relationship between Economic Growth and Service Sector in Tanzania: An Empirical Investigation

Author

Listed:
  • Magoti, Edwin
  • Mtui, John M.

Abstract

The study uses Autoregressive Distributed Lag Model (ARDL) to examine the relationship between economic growth and service sector in Tanzania for the period 1970 to 2015. Further, bounds test of cointegration is used to test for existence of long-run relationship among the variables. Results show that the real economic growth is positively related to the growth rate of the services sector, and the latter’s effect is statistically significant in the long-run as postulated in theory. The error correction term has the envisaged negative sign and is statistically significant, implying convergence towards the long-run equilibrium. The results also show there is a bi-directional causality between GDP growth and growth of services sector. However, the growth in services sector has no effect on the economic growth in the short-run. This calls for friendly cum enabling business environment for investment and business operations in trade, tourism, financial sector, etc. in order to enhance value addition in the services industry. Promotion of technological innovations in the services sector is very crucial so as to improve efficiency, quality and productivity in delivery of services and thus enhance competition. The services sector should be considered as equally important as industrial sector due to cross-fertilization between the two.

Suggested Citation

  • Magoti, Edwin & Mtui, John M., 2020. "The Relationship between Economic Growth and Service Sector in Tanzania: An Empirical Investigation," African Journal of Economic Review, African Journal of Economic Review, vol. 8(2), July.
    • Handle: RePEc:ags:afjecr:304723
    DOI: 10.22004/ag.econ.304723
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/304723/files/Magoti_20200704.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.304723?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ilkhom SHARIPOV, 2015. "Contemporary Economic Growth Models And Theories: A Literature Review," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7(3), pages 759-773, September.
    2. Uwitonze, Eric & Heshmati, Almas, 2016. "Service Sector Development and its Determinants in Rwanda," IZA Discussion Papers 10117, Institute of Labor Economics (IZA).
    3. Fagerberg, Jan & Verspagen, Bart, 2002. "Technology-gaps, innovation-diffusion and transformation: an evolutionary interpretation," Research Policy, Elsevier, vol. 31(8-9), pages 1291-1304, December.
    4. Mattoo, Aaditya & Rathindran, Randeep, 2006. "Measuring Services Trade Liberalization and Its Impact on Economic Growth: An Illustration," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 64-98.
    5. Ayaz Ahmed & Henna Ahsan, 2011. "Contribution of Services Sector in the Economy of Pakistan," Working Papers id:4673, eSocialSciences.
    6. repec:asi:ajoerj:2013:p:1106-1130 is not listed on IDEAS
    7. Hyun-Jeong Kim, 2006. "The Shift to the Service Economy: Causes and Effects (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 12(4), pages 35-76, December.
    8. Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, March.
    9. Dinah Maclean, 1996. "Productivity growth in the commercial service sector," Bank of Canada Review, Bank of Canada, vol. 1996(Autumn), pages 3-18.
    10. Brooks,Chris, 2008. "RATS Handbook to Accompany Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9780521896955, January.
    11. Joseph Francois & Bernard Hoekman, 2010. "Services Trade and Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 642-692, September.
    12. Turgut Türsoy, 2017. "Causality between Stock Prices and Exchange Rates in Turkey: Empirical Evidence from the ARDL Bounds Test and a Combined Cointegration Approach," IJFS, MDPI, vol. 5(1), pages 1-10, March.
    13. J. Steven Landefeld & Eugene P. Seskin & Barbara M. Fraumeni, 2008. "Taking the Pulse of the Economy: Measuring GDP," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 193-216, Spring.
    14. Eman Attiah, 2019. "The Role of Manufacturing and Service Sectors in Economic Growth: An Empirical Study of Developing Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 112-127.
    15. Hira Mujahid & Shaista Alam, 2014. "Service Sector as an Engine of Growth: Empirical Analysis of Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 377-386, March.
    16. Rashmi Banga & B.N.Goldar, 2004. "Contribution of services to output growth and productivity in Indian manufacturing: Pre and post reforms," Indian Council for Research on International Economic Relations, New Delhi Working Papers 139, Indian Council for Research on International Economic Relations, New Delhi, India.
    17. Schettkat, Ronald & Yocarini, Lara, 2003. "The Shift to Services: A Review of the Literature," IZA Discussion Papers 964, Institute of Labor Economics (IZA).
    18. Emeka Nkoro & Aham Kelvin Uko, 2016. "Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 5(4), pages 1-3.
    19. Najia SAQIB, 2013. "Impact of Development and Efficiency of Financial Sector on Economic Growth: Empirical Evidence from Developing Countries," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(3), pages 1-9, June.
    20. Tarlok Singh, 2010. "Services sector and economic growth in India," Applied Economics, Taylor & Francis Journals, vol. 42(30), pages 3925-3941.
    21. Hira Mujahid & Shaista Alam, 2014. "Service Sector as an Engine of Growth: Empirical Analysis of Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(3), pages 377-386.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pantaleo, Innocent M. & Ngasamiaku, Wilhelm M., 2021. "Are Sectors Hit Equally by Covid – 19 Pandemic? Some Insights from Assessing the Economic Impacts of the Pandemic on Selected Sectors in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 9(3), June.
    2. Ndubuisi, Gideon & Otioma, Chuks & Tetteh, Godsway Korku, 2021. "Digital infrastructure and employment in services: Evidence from Sub-Saharan African countries," Telecommunications Policy, Elsevier, vol. 45(8).
    3. Chacha Magasi & Robert Galan Mashenene & Dorice Munuo Ndengenesa, 2022. "Service Quality and Students’ Satisfaction in Tanzania’s Higher Education: A Re-examination of SERVQUAL Model," International Review of Management and Marketing, Econjournals, vol. 12(3), pages 18-25, May.
    4. Odusanya, Ibrahim A. & Toriola, Anu K. & Ajayi, Felix Odunayo, 2023. "The Nexus Between Labour Productivity and Agricultural Development in Sub-Saharan Africa (1991-2021)," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(4), October.
    5. Kehinde Oluwole OLA & Felix Iredia IFADA, 2023. "Four Major Service Industries and Economic Growth in Nigeria: An Empirical Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(7), pages 213-228, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John C. Anyanwu & Joanna C. Anyanwu, 2018. "Accounting for the Rising Value Added in Services Compared to That in Agriculture in African Economies," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 6(4), pages 476-500, December.
    2. Michel Lioussis & Mònica Serrano, 2022. "Services trade contribution on global income generation (2000 - 2014) Abstract: This paper investigates the contribution of services trade to the variation of global income generation for the period o," UB School of Economics Working Papers 2022/423, University of Barcelona School of Economics.
    3. Sonia Mukherjee, 2017. "The Role of Services in Total Productivity Growth of Indian Manufacturing Firms: A Firm Level Analysis Since 2000," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(2), pages 121-131.
    4. Kehinde Oluwole OLA & Felix Iredia IFADA, 2023. "Four Major Service Industries and Economic Growth in Nigeria: An Empirical Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(7), pages 213-228, July.
    5. Sahoo, Pravakar & Dash, Ranjan Kumar, 2014. "India's surge in modern services exports: Empirics for policy," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1082-1100.
    6. Singh, Nirvikar, 2006. "Services-led industrialization in India: Assessment and lessons," MPRA Paper 1276, University Library of Munich, Germany.
    7. Bernard Hoekman, 2017. "Trade in services: Opening markets to create opportunities," WIDER Working Paper Series wp-2017-31, World Institute for Development Economic Research (UNU-WIDER).
    8. Tarr, David G., 2013. "Putting Services and Foreign Direct Investment with Endogenous Productivity Effects in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 303-377, Elsevier.
    9. López, Dorotea & García, Camila & Muñoz, Felipe, 2018. "Trade in services and development: Policy perception in Chile," TEC Empresarial, School of Business, Costa Rica Institute of Technology (ITCR), vol. 12(2), pages 33-44.
    10. Tarr, David, 2012. "Impact of services liberalization on industry productivity, exports and development : six empirical studies in the transition countries," Policy Research Working Paper Series 6023, The World Bank.
    11. Sèna Kimm Gnangnon, 2021. "Services diversification and economic growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 18(1), pages 49-86, June.
    12. Bernard Hoekman, 2017. "Trade in services: Opening markets to create opportunities," WIDER Working Paper Series 031, World Institute for Development Economic Research (UNU-WIDER).
    13. H. Stephen Gardner & Lourenço S. Paz & John Ssozi, 2023. "The influence of international trade on labour productivity in services: The case of Brazil in the 1990s," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 268-290, February.
    14. Sonia Mukherjee, 2018. "Services Outsourcing and Productivity Growth," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 19(2), pages 192-209, September.
    15. Muhammad Salam & Javed Iqbal & Anwar Hussain & Hamid Iqbal, 2018. "The Determinants of Services Sector Growth: A Comparative Analysis of Selected Developed and Developing Economies," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 57(1), pages 27-44.
    16. Richard Chauke & Thobeka Ncanywa, 2021. "Infrastructure development and economic complexity in South Africa. Running title: Can infrastructure development influence economic complexity?," Technium Social Sciences Journal, Technium Science, vol. 26(1), pages 488-501, Decembrie.
    17. Ifeoluwa Adeola Ologunde & Forget Mingiri Kapingura & Kin Sibanda, 2020. "Sustainable Development and Crude Oil Revenue: A Case of Selected Crude Oil-Producing African Countries," IJERPH, MDPI, vol. 17(18), pages 1-30, September.
    18. Andrés Maroto-Sanchez, 2010. "Growth and productivity in the service sector: The state of the art," Working Papers 07/10, Instituto Universitario de Análisis Económico y Social.
    19. Rashmi Banga, 2005. "Role of Services in the Growth Process: A Survey," Indian Council for Research on International Economic Relations, New Delhi Working Papers 159, Indian Council for Research on International Economic Relations, New Delhi, India.
    20. Fiorini, Matteo & Hoekman, Bernard, 2018. "Services trade policy and sustainable development," World Development, Elsevier, vol. 112(C), pages 1-12.

    More about this item

    Keywords

    Labor and Human Capital;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:afjecr:304723. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://www.ajol.info/index.php/ajer/index .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.