Does the Service Sector Cause Economic Growth? Empirical Evidence from Saudi Arabia

By Abdulkarim Alhowaish.

Published by The Global Studies Journal

Format Price
Article: Print $US10.00
Published online: June 13, 2014 $US5.00

This research study aims to empirically investigate the role of the service sector in the economic growth of Saudi Arabia during the period of 1969-2012. Systematic econometric techniques are applied to investigate the causal relationship and the magnitude of impact between the service sector and economic growth using annual data over the period 1969-2012. Empirical results show that there exists a long-term stable dynamics equilibrium relationship between the service sector and economic growth. The service industry plays an important role in economic growth, since every 1% increase in service sector output will promote 0.93% economic growth. The Granger causality test shows that two-way Granger causality exists between the service sector and economic growth, that services play a clear role in promoting economic growth, and that economic growth further promotes the development of service industries. In order to develop the Saudi market economy, policy makers needs to formulate a long-term service development strategy that enhances the Saudi industrial structure away from current oil-resource dependency structure.

Keywords: Services Sector, Economic Growth, Causality Tests, Saudi Arabia

Global Studies Journal, Volume 7, Issue 2, December 2014, pp.1-6. Article: Print (Spiral Bound). Published online: June 13, 2014 (Article: Electronic (PDF File; 548.551KB)).

Dr. Abdulkarim Alhowaish

Associated Professor, Urban and Regional Planning, College of Architecture and Planning, University of Dammam, Dammam, Eastern Province, Saudi Arabia


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