Empirical study on the contribution of the development of service industry to the economic growth in China

Abstract

In order to discuss the relationship between service industry and economic growth in China, it makes a cointegration test according to the corresponding data from 1990 to 2006 in China. The results show that there is a long-term stable equilibrium relationship between service industry and economic growth. If the service industry increases by 1 percent, the economic will increase by 0.98 percent. With the error correction model, the results show that the short-term fluctuation of service industry would cause the same-way change of economic growth. If the economic growth deviates from the long-balanced value, it will be adjusted by 23 percent next year. With the Granger causality test, the results show that service industry Granger causes economic growth. With the variance decomposition and impulse response function, the results show that service industry plays an important role on economic growth.