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Trade in services and trade in goods: differences and complementarities

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  • Carolina Lennon

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, UP1 - Université Paris 1, Panthéon-Sorbonne - Université Paris I - Panthéon-Sorbonne - PRES HESAM, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

Abstract

The purpose of this paper is double. First, we empirically explore to what extent the determinants of trade in services differs from those of trade in goods and, second, by the use of instrumental variables, we explore for potential complementarities between bilateral trade in goods and bilateral trade in services. By the use of gravity equations, the main results show that "bilateral trust and contract enforcement environment", "networks", "labor markets" and "technology and technology of communication" have higher impact on service trade than on trade in goods; finally, after instrumenting for endogeneity, we found that bilateral trade in goods explains bilateral trade in services: the resulting estimated elasticity is close to 1. Reciprocally, though to a lesser extent, bilateral trade in services affects positively bilateral trade in goods: a 10% increase in trade in services raises traded goods by 4.6%.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00586223.

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Date of creation: Sep 2008
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Handle: RePEc:hal:psewpa:halshs-00586223

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Keywords: international trade in services ; trade in goods ; gravity equations;

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  1. Carolina LENNON & Daniel MIRZA & Giuseppe NICOLETTI, 2009. "Complementarity of Inputs across Countries in Services Trade," Annales d'Economie et de Statistique, ENSAE, issue 93-94, pages 183-205.
  2. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing," IMF Working Papers 04/186, International Monetary Fund.
  3. van Marrewijk, Charles & Stibora, Joachim & de Vaal, Aldert, 1996. "Services Tradability, Trade Liberalization and Foreign Direct Investment," Economica, London School of Economics and Political Science, vol. 63(252), pages 611-31, November.
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