Trade Liberalization and Services Sector Growth: A Case of Selected South Asian Countries

Abstract

The current study attempts to find how trade liberalization effects services sector growth of selected South Asian economies. Yearly panel data for 1990-2020 was utilized for four selected countries; Pakistan, India, Bangladesh, and Sri Lanka. Long run results of panel Autoregressive distributed Lag ARDL model indicates that trade openness and capital investment have positive and significant impact on services sector whereas government - household consumption expenditure, labor force, and inflation have inverse relation with service sector growth. In order to enhance the third largest sector of the economy and to boost its growth, study concludes with the empirical findings that governments of these countries require to reformulate their trade policies which should be less restrictive. Moreover, should put effort to design strategies on; creating free trade zone or south Asian economic union that will be a source of employment for less skilled workers as well, low-cost skill development schemes and restructuring regional labor markets.