The Service Export-Led Growth Hypothesis in Mauritius
This study contributes to the debate on the growth and development potential of trade in services. The services sector and service exports are large and also fast growing in importance in Africa, and noticeably in Mauritius. This study aims to investigate the potential co-integration between service exports and economic growth in Mauritius, using a newly constructed disaggregated dataset on trade in services from 1976 to 2014 and applying the autoregressive distributed lag (ARDL) bounds testing procedure. The test of a long-term relationship between real gross domestic product (GDP) per capita on trade in services, both aggregated and disaggregated, is conducted. Our results show that there is a significant long-term relationship between total service exports and economic growth. In addition, the results show that among all the measures of service exports tested, only trade and business services and insurance and pension services have a significant long-term effect on growth. The study also finds that there is a distinct unidirectional causality from economic growth to total service exports and from economic growth to trade and business services. Moreover, the study also finds a bidirectional causality between insurance and pension services and economic growth. Overall, our findings provide justification for the use of an ARDL approach in the service export-led growth (SELG) hypothesis and support Mauritius’ objective of diversifying and investing in the service industry.
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