The Determinants of Services Sector Growth: A ComparativeAnalysis of Selected Developed and Developing Economies

This study empirically examines the possible factors that determine the services sector growth, both in selected developed and developing economies. For estimation purpose, the study employs the static as well as the dynamic panel data estimation technique with panel data over the period 1990-2014. The results suggest that GDP per capita, FDI net inflow, trade openness and innovations are the common factors that significantly affect the services sector growth both in developed and in developing economies. However, the productivity gap is the only factor that does not have any significant impact on services sector growth, both in developed and developing economies, which indicates that the Baumol’s cost disease has been cured.