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From selling goods to selling services: firm responses to trade liberalization

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

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 & Soderbery, Anson & Wright, Greg C., 2014. "From selling goods to selling services: firm responses to trade liberalization," LSE Research Online Documents on Economics 60523, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:60523
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    References listed on IDEAS

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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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