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Cross-Border Trade and FDI in Services

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Author Info

  • Carmen Fillat-Castejón
  • Joseph F. Francois

    ()
    (The Vienna Institute for International Economic Studies, wiiw)

  • Julia Wörz

Abstract

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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Bibliographic Info

Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 50.

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Length: 49 pages including 15 Tables and 3 Figures
Date of creation: Feb 2009
Date of revision:
Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:50

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Related research

Keywords: FDI; imports; services; panel data; substitution and complementary effects;

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Citations

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Cited by:
  1. Carolina Lennon, 2008. "Trade in services: Cross-border trade vs commercial presence. Evidence of complementarity," PSE Working Papers halshs-00586217, HAL.
  2. Stefano Federico & Enrico Tosti, 2012. "Exporters and importers of services: firm-level evidence on Italy," Temi di discussione (Economic working papers) 877, Bank of Italy, Economic Research and International Relations Area.
  3. Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2013. "Computable General Equilibrium Modeling of Market Access in Services," Handbook of Computable General Equilibrium Modeling, Elsevier.
  4. Elisabeth Christen & Joseph Francois & Bernard Hoekman, 2012. "CGE modeling of market access in services," Working Papers 2012-13, Faculty of Economics and Statistics, University of Innsbruck.
  5. Elisabeth Christen & Joseph Francois, 2010. "Modes of Delivery in Services," Economics working papers 2010-08, Department of Economics, Johannes Kepler University Linz, Austria.
  6. Joseph F. Francois & Bernard Hoekman, 2009. "Services Trade and Policy," Economics working papers 2009-03, Department of Economics, Johannes Kepler University Linz, Austria.
  7. Ranjan Dash & P. Parida, 2013. "FDI, services trade and economic growth in India: empirical evidence on causal links," Empirical Economics, Springer, vol. 45(1), pages 217-238, August.

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