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From Selling Goods to Selling Services: Firm Responses to Trade Liberalization

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  • Breinlich, Holger
  • Wright, Greg C.
  • Soderbery, Anson

Abstract

In the face of trade liberalization domestic firms are often forced out of the market, whereas others adapt and survive. In this paper we focus on a new channel of adaptation, namely the shift toward increased provision of services in lieu of goods production. We exploit variation in EU trade policy to show that lower manufacturing tariffs cause firms to shift into services provision and out of goods production. Additionally, we find that a successful transition is strongly associated with higher firm-level R&D stocks whereas higher physical capital stocks slow the shift into services provision.

Suggested Citation

  • Breinlich, Holger & Wright, Greg C. & Soderbery, Anson, 2014. "From Selling Goods to Selling Services: Firm Responses to Trade Liberalization," CEPR Discussion Papers 10116, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10116
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    More about this item

    Keywords

    Services trade; Trade liberalization;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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