Factors Affecting the Development of the Service Sector in Turkey: An Econometric Investigation

Abstract

Since the second half of the 20th century, the service sector has shown a rapid expansion trend, first in developed countries and then in developing countries. Türkiye is not an exception in this regard. In the last 50 years a rapid shift of services sector has been witnessed in Türkiye. So, it is important to analyze the expansion dynamics of the service sector correctly so that the structural change to take place in a healthier and more controlled manner. Findings from cointegrated regression methods reveal that income level, openness ratio, and education level contribute positively to the development of the service sector. On the other hand, foreign direct investment inflows and the increase in the productivity of the industrial sector have a negative impact on the development of the service sector.