An Empirical Study of the Implications of Service Sector Growth for Output Growth in Bangladesh

Abstract

Due to the growing importance of Bangladesh’s service economy and the country’s expanding industrial sector, strengthening the service sector has become a primary objective. Given the size and interconnectedness of the services sector with the rest of the economy, it is critical to understand how it affects other macroeconomic variables, most notably output growth. Our primary objective is to survey and analyse the service sector’s current state to ascertain its contribution to economic growth. This study undertakes this investigation using systematic econometric approaches and annual data from 1972 to 2021. Findings suggest that expanding the service industry in Bangladesh positively impacts the country’s per capita income (PCI) growth rate. Particularly, if the service sector growth increases by one percentage point, the growth of per capita real GDP will increase by 0.62 percentage points. The finding has important policy implications. Most importantly, government needs to enact policies to promote the service sector of the country in an effort to achieve economic prosperity.

JEL Codes: L80, O11, O14