Degree Name
Master of Arts
Graduate Program
Economics
Advisor
Sylwester, Kevin
Abstract
From debates over the services sector as the new engine of growth to ‘premature deindustrialization,’ developing countries are having a harder time figuring out the right strategy to achieve higher income. Can the services sector replace manufacturing as the driving force of growth for developing countries in the twenty-first century? This study examines the relationship between the services sector and economic growth in 27 developing countries from 1990 to 2010. The study regresses the per five-year growth rates of GDP per capita on sectoral shares at the beginning of each five-year period, controlling for population size, human capital, trade openness, and the informal economy. We find no evidence that the services sector served as the new engine of growth for developing countries during the study period. Exploring heterogeneity within the services sector, only the public services sector is positively associated with the per five-year growth rates of GDP per capita.