Analysis of the economic and environmental imperatives of the service sector: The role of government in promoting sustainable development

The important role of the service sector in attaining the Sustainable Development Goals (SDG-8 and SDG-13) cannot be overemphasized. Precisely, SDG-8 focuses on the promotion of sustained economic growth while SDG-13 entails the mitigation of climate change and its impacts. Stakeholders are expected to embrace sustainable policies and redesign business processes to tackle the environmental issues associated with the service sector. Besides, nations use government consumption expenditure and tax revenue to boost the service sector's activities, which could have ramifications for environmental sustainability. Hence, this study is motivated by the need to ensure a balance between the economic and environmental imperatives of the service sector. The objective is to analyse the economic and environmental impacts of the service value added in Southeast Asia during 1990-2020. It also seeks to determine the moderating roles of government consumption expenditure and tax revenue on the economic and environmental impacts of the service value added. The estimation methods utilized are the Fully Modified Ordinary Least Squares (FMOLS) and Instrumental Variables (IV) techniques. The empirical results of the economic growth model indicate that the service value added accelerates economic growth while the environmental quality model suggests that the service value added intensifies carbon emissions and ecological footprint. The results of the interaction model show that government consumption expenditure and tax revenue mitigate the environmental impact of the service value added. This study represents an innovative idea that unravels both the direct and indirect impacts of the service sector on economic and environmental sustainability. The implication of this study is that service industry should conduct service activities in an environmentally friendly manner while policymakers should use government expenditure and tax to mitigate the environmental problems associated with the service sector.