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The Tradability of Services: Geographic Concentration and Trade Costs

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  • Antoine Gervais

    (University of Notre Dame)

  • J. Bradford Jensen

    (University of Notre Dame)

Abstract

In this paper, we use a unique dataset on the distribution of output and demand across regions of the United States to estimate trade costs for 969 service and manufacturing industries. Our estimation method is a natural extension of the gravity model of trade and identifies trade costs in the absence of trade data. The estimated trade costs are higher on average for service industries, but there is considerable variation across industries within sectors. Using the trade cost estimates, we classify industries into tradable and nontradable categories. We find that accounting for tradable service industries nearly doubles the international exposure of the US economy, tradable services value added is unevenly distributed across geographical regions, labor productivity and wages are higher on average for tradable industries, and potential welfare gains from trade liberalization in the service sector are sizable.

Suggested Citation

  • Antoine Gervais & J. Bradford Jensen, 2015. "The Tradability of Services: Geographic Concentration and Trade Costs," Working Paper Series WP15-12, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp15-12
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    More about this item

    Keywords

    Service sector; international trade; trade costs; monopolistic competition;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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