Sri Lankan economy is having a large services sector (60%) but with a small industry sector (26 %). Economic growth theory states that services sector is developed to cater to the industry. Are there theories to explain this phenomenon?
Sorry my dear Pobee,
Micro does not explain this any way. However, growth theorists, except Darron may have failed to explain this.
Upananda
Hi Upananda Witta Arachchilage
It is a very interesting fact that Sri Lanka has a large service sector, while the manufacturing sector is quite small. However, after exploring the service sector, this fact becomes understandable. The service sector of Sri Lanka is dominated by tourism. Since tourism does not cater any manufacturing industry, it is reasonable that the service sector may have outgrown the manufacturing sector. In addition, it is the manufacturing sector which cater tourism, particularly food industry
Have you brainstormed on the issue before looking for theory? Just list your reasons, without debate, and find connections to your answers. Theories of Growth in development economics tell you the transition of economies. Empirical studies thereafter showed trajectories for growth; eg. export-led economies, import substitution, etc. Agrarian transition studies may also shed light. I have no idea what field of study you are in. If you are in economics, you will find your way with the keywords in this reply. If you are not, agrarian transition studies find more explorations in rural development, sociology, even history (studies on Indonesia, for example).
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