Towards Explaining Growth of Private and Public services in the Emerging Market Economies

The employment in public and private services in Emerging Market Economies (EME) has undergone disparate patterns of change during the transition. The paper reveals the main determinants of employment growth in different service groups in the period 1995-2008. Standard variables (per capita income, productivity gap and government expenditure) provide insufficient explanation for the increasing share of services employment while transition reforms indicators exert statistically significant influence. Estimations differ substantially for public, mixed and private services. Deviations from the theoretical framework and patterns in developed economies are observed that need to take into account path dependency of the convergence process of emerging market economies in major service groups. The findings are inconclusive and call for the extension of research towards additional explanatory factors and improvement of data set.