Sectoral output growth and economic linkages in the barbados economy over the past fifty years

Using multivariate cointegration analysis, this paper investigates the long run and shortrun relationships between the agriculture, industry and service sectors for Barbados over the past five decades. Sectoral real output is analysed in two sub-periods: 1946 to 1969 and the years 1970-2003. The reason for splitting the sample is to investigate whether the commonly held view that a structural transformation from an economy dominated by agriculture to one that is predominantly service-oriented was reflected in the data. One cointegrating relationship is found in both sub-periods. The results suggest that for the earlier period, increases in industrial output (services output) were associated with lower (higher) agricultural GDP over the long run. In the short run, only changes in industrial output promoted growth in agricultural output. In the latter period, an expansion in services output was found to be the only determinant of industrial output in both the short and long run, as agricultural output did not appear to have any statistically significant impact in either timeframe.