Cross-Border Trade and FDI in Services
AbstractWorking with a panel dataset of of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the service sectors. We first develop a consistent analytical framework for the application of the gravity model jointly to services trade and commercial presence (i.e. FDI), using a composite model of delivery that offers testable hypotheses about the roles of different modes of services supply as complements or substitutes. We further link our estimates to policy variables measuring market regulations that may act directly or implicitly as barriers to trade. We find robust evidence of complementary effects in the short-run, which is reinforced in the long run by an increased potential for cross-border imports based on previous FDI inflows. A detailed analysis by individual service sectors highlights business, communication and financial services as showing the largest potential for cross-border trade when market regulations are reduced and when commercial presence increases.
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Bibliographic InfoPaper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2008-12.
Length: 50 pages
Date of creation: Sep 2008
Date of revision:
FDI; imports; services; panel data; substitution and complementary effects.;
Other versions of this item:
- Carmen Fillat-Castejón & Joseph F. Francois & Julia Wörz, 2009. "Cross-Border Trade and FDI in Services," wiiw Working Papers 50, The Vienna Institute for International Economic Studies, wiiw.
- Fillat Castejón, Carmen & Francois, Joseph & Woerz, Julia, 2008. "Cross-Border Trade and FDI in Services," CEPR Discussion Papers 7074, C.E.P.R. Discussion Papers.
- F10 - International Economics - - Trade - - - General
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-04 (All new papers)
- NEP-BEC-2008-11-04 (Business Economics)
- NEP-INT-2008-11-04 (International Trade)
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- Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2012.
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- Joseph F. Francois & Bernard Hoekman, 2009. "Services Trade and Policy," Economics working papers 2009-03, Department of Economics, Johannes Kepler University Linz, Austria.
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