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Trade in services: Cross-border trade vs commercial presence. Evidence of complementarity

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  • Carolina Lennon

    (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, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, UP1 - Université Paris 1, Panthéon-Sorbonne - Université Paris 1 - Panthéon-Sorbonne - PRES HESAM)

Abstract

The purpose of this paper is to empirically investigate the relationship between cross border trade in services (Mode 1) and commercial presence in services (Mode 3). I postulate that these two modes of supply facilitate each other, and that, in contrast to the manufacturing sector, this complementarity might occur even at the level of horizontal investment. For the empirical analysis I make use of bilateral data on US majority-owned foreign affiliate operations (MOFAs). The same exercise is carried for the case of goods sectors. After using two different estimating techniques, results confirm the intuition, not only Mode1 and Mode 3 in services are complements but also the complementarity relationship is stronger than that found in the case of goods. Moreover, the complementarity between this two modes of supply, for the case of services, is also found at the level of horizontal FDI.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00586217.

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Date of creation: Sep 2008
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Handle: RePEc:hal:wpaper:halshs-00586217

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586217
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Related research

Keywords: international trade in services ; modes of supply ; FDI;

References

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  1. Clausing, Kimberly A, 2000. "Does Multinational Activity Displace Trade?," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 190-205, April.
  2. Blonigen, Bruce A., 2001. "In search of substitution between foreign production and exports," Journal of International Economics, Elsevier, vol. 53(1), pages 81-104, February.
  3. Head, Keith & Ries, John, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-22, February.
  4. Rupa Chanda, 2006. "Inter-modal Linkages in Services Trade," OECD Trade Policy Papers 30, OECD Publishing.
  5. Carolina Lennon, 2009. "Trade in Services and Trade in Goods: Differences and Complementarities," wiiw Working Papers 53, The Vienna Institute for International Economic Studies, wiiw.
  6. Amiti, Mary & Wakelin, Katharine, 2002. "Investment Liberalization and International Trade," CEPR Discussion Papers 3492, C.E.P.R. Discussion Papers.
  7. Keith Head & John Ries, 2004. "Exporting and FDI as Alternative Strategies," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 409-423, Autumn.
  8. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-44, September.
  9. Lipsey, Robert E & Weiss, Merle Yahr, 1981. "Foreign Production and Exports in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 488-94, November.
  10. Caroline Freund & Diana Weinhold, 2002. "The Internet and International Trade in Services," American Economic Review, American Economic Association, vol. 92(2), pages 236-240, May.
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