The effect of the manufacturing industry and services sector on economic growth: Selected transitional economies within the framework of Kaldor Approach

The role of industrialization in ensuring the economic development is one of the most discussed topics especially in the Post II. World War. In this direction, industrialization has a key role in ensuring economic development for less-developed developing countries in where capital is relatively scarce. However, the insufficient development of industrialization and the rapid competition in the services sector on a global scale have caused to increase the share of the services sector within the economies recently. Emanating from the perspective by Kaldor (1966), who systematically put forward the view that industrialization is the locomotive of economic growth, this dissertation aimed to examine empirically the effect of industrialization on production, by considering the services sector, for thirteen selected transition economies. Utilizing the annual panel data set over the period of 1980-2018, the existence of a long-term relationship was examined by means of panel cointegration tests and the long-term models were estimated with cointegration estimators. Within the framework of different models that are introduced by Kaldor (1966), existence of the cointegration relationship were confirmed according to the results of panel cointegration tests. According to the long-term model estimation results, it is concluded that the value in the industry sector has a greater effect on enhancing the production compared to the services sector. In addition, it draws attention as another important finding that productivity in the industrial sector increases production more than the productivity in services and other sectors.