Carmen Fillat Castejon () (Department of Applied Economics and Economic History, University of Zaragoza) Julia Wörz () (The Vienna Institute for International Economic Studies, wiiw) Joseph Francois () (The Vienna Institute for International Economic Studies, wiiw)
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Working with a panel dataset of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the services sectors. We first develop a consistent analytical framework for the application of the gravity model to both 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 services 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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Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series Working Papers with number
50.
Length: 49 pages including 15 Tables and 3 Figures Date of creation: Feb 2009 Date of revision: Publication status: Published as wiiw Working Paper, February 2009 Handle: RePEc:wii:wpaper:50
Find related papers by JEL classification: F10 - International Economics - - Trade - - - General F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
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