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Measuring the Cost of International Trade in Services

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  • Miroudot, Sébastien
  • Sauvage, Jehan
  • Shepherd, Ben

Abstract

We present a new dataset of international trade costs in services sectors. Using a theory-based methodology combined with data on domestic shipments and cross-border trade, we find that trade costs in services are much higher than in goods sectors: a multiple of two to three times in many cases. Trade costs in services have remained relatively steady over the last ten years, whereas trade costs in goods have fallen overall at an impressive rate. We also present two examples of the ways in which our dataset could be used in future work. First, we examine the impact of regional trade agreements on trade costs in services. Although we find that intra-bloc trade costs are lower than those facing outside countries, the differential is usually quite small for services, and in some cases has even been narrowing over time. This finding accords with the observation that because service sector reform is about re-regulation, “preferential” agreements tend to involve less discrimination than in goods markets. Second, we show for the first time that services sectors with lower trade costs tend to be more productive, and experience faster productivity growth. This result lines up well with the evidence from goods markets.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27655.

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Date of creation: 22 Dec 2010
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Handle: RePEc:pra:mprapa:27655

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Related research

Keywords: Trade policy; Trade in services; Regional integration; Productivity.;

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References

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  1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
  2. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  3. Holger Breinlich & Chiara Criscuolo, 2008. "Service Traders in the UK," CEP Discussion Papers dp0901, Centre for Economic Performance, LSE.
  4. Sébastien Miroudot & Rainer Lanz & Alexandros Ragoussis, 2009. "Trade in Intermediate Goods and Services," OECD Trade Policy Papers 93, OECD Publishing.
  5. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, 01.
  6. Philippa Dee, 2003. "Modelling the Policy Issues in Services Trade," Economie Internationale, CEPII research center, issue 94-95, pages 283-300.
  7. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(538), pages F374-F403, 06.
  8. Christian Broda & Joshua Greenfield & David Weinstein, 2006. "From Groundnuts to Globalization: A Structural Estimate of Trade and Growth," NBER Working Papers 12512, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Patrick Messerlin, 2010. "New challenging issues for world trade and the world economy Strategies for the EC-Turkey Custom Union," Sciences Po publications info:hdl:2441/5l6uh8ogmqi, Sciences Po.
  2. Arvis, Jean-François & Duval, Yann & Shepherd, Ben & Utoktham,Chorthip, 2013. "Trade costs in the developing world : 1995 - 2010," Policy Research Working Paper Series 6309, The World Bank.
  3. Erik van der Marel, 2011. "Determinants of comparative advantage in services," LSE Research Online Documents on Economics 38993, London School of Economics and Political Science, LSE Library.
  4. Shepherd, Ben, 2012. "Services firms in the developing world: An empirical snapshot," MPRA Paper 41732, University Library of Munich, Germany.
  5. Shepherd, Ben & Pasadilla, Gloria, 2012. "Services as a New Engine of Growth for ASEAN, the People’s Republic of China, and India," ADBI Working Papers 349, Asian Development Bank Institute.
  6. Erik van der Marel, 2012. "Determinants of Comparative Advantage in Services," FIW Working Paper series 087, FIW.
  7. Hira Mujahid & Shaista Alam, 2014. "Service Sector as an Engine of Growth: Empirical Analysis of Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, Asian Economic and Social Society, vol. 4(3), pages 377-386, March.
  8. Erik Marel & Ben Shepherd, 2013. "Services Trade, Regulation and Regional Integration: Evidence from Sectoral Data," The World Economy, Wiley Blackwell, vol. 36(11), pages 1393-1405, November.
  9. Patrick Messerlin, 2010. "The European Community commercial policy," Sciences Po publications info:hdl:2441/5l6uh8ogmqi, Sciences Po.

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