Abstract
This paper seeks to find whether the shift in the production structure away from agriculture to services is only the result of the change in income status or the changing economic relations among countries has any important role to play here. It tries to find out the factors responsible for the huge expansion of the services output in recent times (1971–2009) considering three different samples (a) a group of developed and developing countries, (b) a group of developing countries, in particular and also (c) the case of India. The paper finds that along with the variables representing changing income status and technological development, policy changes related to globalization and liberalisation are also important but these policy variables can not explain the shift in the output share of the service sector in the 1990s.
Acknowledgment
The author is grateful to Dr. Subrata Guha for his valuable comments and suggestions.
Appendix
Regressing the share of service sector output in GDP after logit transformation (S) and the share of industrial sector output in GDP (iy) on the explanatory variables: (Results).
| Independent variables | Dependent variable (S) | Dependent variable (iy) |
| constant | −0.81 | −29.06 |
| (2.34) | (57.15) | |
| l.S | 0.40*** | − |
| (0.13) | ||
| l.iy | − | 0.21** |
| (0.09) | ||
| logcgdp | −0.74*** | 29.57*** |
| (0.24) | (7.09) | |
| logcgdpsq | 0.05*** | −1.67*** |
| (0.01) | (0.39) | |
| logpop | 0.61 | −11.64 |
| (0.54) | (10.91) | |
| logpopsq | −0.03 | 0.44 |
| (0.03) | (0.62) | |
| cg | 0.01*** | −0.21** |
| (0.004) | (0.11) | |
| openk | 0.002*** | −0.02 |
| (0.0007) | (0.02) | |
| openk*TD2 | −0.001** | 0.03*** |
| (0.0006) | (0.02) | |
| fdigdp | 0.01** | −0.18* |
| (0.006) | (0.09) | |
| fdigdp*TD2 | −0.02** | 0.31** |
| (0.008) | (0.13) | |
| TD1 | −0.08** | 1.64* |
| (0.03) | (0.84) | |
| TD2 | 0.16*** | −3.32*** |
| (0.04) | (1.18) | |
| R-square | 0.44 | 0.29 |
| No. of observations | 2304 | 2304 |
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