The role and impact of services sector on economic growth : an econometric investigation of tourism and air services in Fiji (1968-2006) : a thesis presented in partial fulfillment of the requirements for the degree of Masters of Management in Economics at Massey University, Palmerston North, New Zealand
Empirical studies have established that tourism is a major determinant of economic growth
and that international air services have a beneficial effect on the growth and development
of an economy. It has also been argued that trade and public enterprise reforms in the
service sectors, undertaken to a greater extent in high income countries, have had a positive
impact on the sectors performances.
This study analyses several hypotheses relating to Fiji’s tourism and air transport service
industries. First the study examines the contribution of tourism exports to economic growth
in the case of Fiji. Second, the study analyses whether the tourism reform adopted by Fiji
in 1999 under the World Trade Organization’s General Agreement on Trade in Services
(GATS) has impacted on total tourism export performance. Third, the aviation-service
growth nexus is investigated. Lastly, the effect of the aviation public enterprise reform
activities on the export performance of air services is evaluated.
Using time series annual data from 1968 to 2006, the Auto Regressive Distributed Lag.
methodology has been utilized to estimate the contribution of each service sector to Fiji’s
total service output. The results show that the tourism is a major determinant of growth in
Fiji and that the aviation service-growth hypothesis is also valid for Fiji. The empirical
results show that both the trade reforms in tourism and the pro-competitive measures
undertaken in the airline industry, amongst other determinants, have not significantly
created an impact on the respective export performance of tourism and air services. These
findings provide key policy implications in the light of capitalizing on services exports as a
major source of growth, particularly in developing island countries such as Fiji and the
need to facilitate the strengthening of the market to boost the export performance of
tourism and air services.