IDEAS home Printed from https://ideas.repec.org/a/spr/jqecon/v15y2017i1d10.1007_s40953-016-0045-4.html
   My bibliography  Save this article

Growth in India’s Service Sector: Implications of Structural Breaks

Author

Listed:
  • Purba Roy Choudhury

    (The Bhawanipur Education Society College)

  • Biswajit Chatterjee

    (Jadavpur University)

Abstract

The paper is an attempt to identify the multiple structural breaks in India’s GDP, as well as its main growth enhancing sector i.e., services and its components and subsequently calculate the growth rate in different regimes. The paper uses the Bai-Perron (Econom 66(1), 1998, J Appl Econom 18(1), 2003) methodology of estimating multiple endogenous structural breaks (both pure and partial) in India’s service sector and its components and GDP during 1950–2010. Further, the paper uses the Boyce (Oxf Bull Econ Stat 48:385–391, 1986) methodology of estimating kinked exponential model of the growth rate, and further uses the Banerjee, Lumsdaine and Stock (J Business Econ Stat 10:271–287, 1992) test and the Lumsdaine and Pappel (Rev Econ Stat 79:212–218, 1997) test to check for the stationarity in the presence of structural breaks. The data used in this paper are the components of subsectors of services GDP and GDP at factor cost (with 2004–2005 as base). It is found that there is very little difference between the estimation of pure and partial structural break dates in India’s services GDP and its subsectors and four such breaks have been identified with help of Bai-Perron (Econom 66(1), 1998, J Appl Econom 18(1), 2003) methodology. The Boyce methodology of estimation of growth rates finds that mainly in the third and fourth regimes, the growth rates are highest in the subsectoral as well as at the aggregate levels of services GDP. The Banerjee, Lumsdaine and Stock test (J Business Econ Stat 10:271–287, 1992) and the extended Lumsdaine and Pappel test (Rev Econ Stat 79:212–218, 1997) cannot negate the presence of unit root in the data, irrespective of the presence of multiple structural breaks. The paper concludes with the identification of four broad regimes of growth of India’s services GDP and in the subsectors with possible explanations thereof.

Suggested Citation

  • Purba Roy Choudhury & Biswajit Chatterjee, 2017. "Growth in India’s Service Sector: Implications of Structural Breaks," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 75-99, March.
    • Handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-016-0045-4
    DOI: 10.1007/s40953-016-0045-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40953-016-0045-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40953-016-0045-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    2. Purba Roy Choudhury, 2014. "Unit Root and Structural Break: Experience from the Indian Service Sector," India Studies in Business and Economics, in: Ambar Nath Ghosh & Asim K. Karmakar (ed.), Analytical Issues in Trade, Development and Finance, edition 127, chapter 18, pages 295-320, Springer.
    3. Dani Rodrik & Arvind Subramanian, 2005. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 193-228, September.
    4. Barry Eichengreen & Poonam Gupta, 2013. "The two waves of service-sector growth," Oxford Economic Papers, Oxford University Press, vol. 65(1), pages 96-123, January.
    5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    6. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    7. Dholakia, Ravindra H., 1994. "Spatial Dimension of the Acceleration of Economic Growth in India," IIMA Working Papers WP1994-02-01_01243, Indian Institute of Management Ahmedabad, Research and Publication Department.
    8. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    9. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    10. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-165, January.
    11. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    12. Andrews, Donald W. K. & Lee, Inpyo & Ploberger, Werner, 1996. "Optimal changepoint tests for normal linear regression," Journal of Econometrics, Elsevier, vol. 70(1), pages 9-38, January.
    13. Mrs. Poonam Gupta & Mr. James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers 2004/171, International Monetary Fund.
    14. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    15. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    16. Ravindra H Dholakia & Amey A Sapre, 2011. "Estimating Structural Breaks Endogenously in India's Post-Independence Growth Path: An Empirical Critique," Journal of Quantitative Economics, The Indian Econometric Society, vol. 9(2), pages 73-87, July.
    17. Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 271-287, July.
    18. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    19. Arvind Virmani, 2004. "Sources of India's economic growth: trends in total factor productivity," Indian Council for Research on International Economic Relations, New Delhi Working Papers 131, Indian Council for Research on International Economic Relations, New Delhi, India.
    20. Boyce, James K, 1986. "Kinked Exponential Models for Growth Rate Estimation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(4), pages 385-391, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Devi, P. Indira & Shanmugam, K.R. & Jayasree, M.G., 2012. "Compensating Wages for Occupational Risks of Farm Workers in India," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 67(2), pages 1-12.
    2. Giorgio Canarella & Rangan Gupta & Stephen M. Miller & Stephen K. Pollard, 2019. "Unemployment rate hysteresis and the great recession: exploring the metropolitan evidence," Empirical Economics, Springer, vol. 56(1), pages 61-79, January.
    3. Travaglini, Guido, 2007. "The U.S. Dynamic Taylor Rule With Multiple Breaks, 1984-2001," MPRA Paper 3419, University Library of Munich, Germany, revised 15 Jun 2007.
    4. D.K. Srivastava & K.R. Shanmugam, 2012. "Stationarity Test for Aggregate Outputs in the Presence of Structural Breaks," Working Papers 2012-072, Madras School of Economics,Chennai,India.
    5. Hervé Le Bihan, 2004. "Tests de ruptures : une application au PIB tendanciel français," Économie et Prévision, Programme National Persée, vol. 163(2), pages 133-154.
    6. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    7. González-Val, Rafael & Marcén, Miriam, 2012. "Breaks in the breaks: An analysis of divorce rates in Europe," International Review of Law and Economics, Elsevier, vol. 32(2), pages 242-255.
    8. Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
    9. Maria Heracleous & Andreas Koutris & Aris Spanos, 2006. "Testing for Structural Breaks and other forms of Non-stationarity: a Misspecification Perspective," Computing in Economics and Finance 2006 493, Society for Computational Economics.
    10. Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
    11. Nidhal Mgadmi & Houssem Rachdi & Hichem Saidi & Khaled Guesmi, 2019. "On the Instability of Tunisian Money Demand: Some Empirical Issues with Structural Breaks," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(1), pages 153-165, March.
    12. Atanu Ghoshray & Issam Malki & Javier Ordóñez, 2022. "On the long-run dynamics of income and wealth inequality," Empirical Economics, Springer, vol. 62(2), pages 375-408, February.
    13. Mohitosh Kejriwal & Claude Lopez, 2013. "Unit Roots, Level Shifts, and Trend Breaks in Per Capita Output: A Robust Evaluation," Econometric Reviews, Taylor & Francis Journals, vol. 32(8), pages 892-927, November.
    14. Maria de Fátima Oliveira & Pedro Reis, 2023. "Portuguese Agrifood Sector Resilience: An Analysis Using Structural Breaks Applied to International Trade," Agriculture, MDPI, vol. 13(9), pages 1-22, August.
    15. Tarlok Singh, 2017. "Are Current Account Deficits in the OECD Countries Sustainable? Robust Evidence from Time-Series Estimators," The International Trade Journal, Taylor & Francis Journals, vol. 31(1), pages 29-64, January.
    16. González-Val, Rafael & Marcén, Miriam, 2012. "Unilateral divorce versus child custody and child support in the U.S," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 613-643.
    17. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, April.
    18. P Muthuramu & T Uma Maheswari, 2019. "Tests for Structural Breaks in Time Series Analysis: A Review of Recent Development," Shanlax International Journal of Economics, Shanlax Journals, vol. 7(4), pages 66-79, September.
    19. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(1), pages 3-29, June.
    20. Marashdeh, Hazem & Wilson, E.J., 2005. "Structural Changes in the Middle East Stock Markets: The case of Israel and Arab Countries," Economics Working Papers wp05-22, School of Economics, University of Wollongong, NSW, Australia.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-016-0045-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.